How Cost Per Inquiry Works

Cost per inquiry (CPI) is the ratio between the quantity of money spent for promotions and advertising and the actual inquiries made. CPI is typical for analyzing the efficiency of a campaign, advertisement, or other forms of business promotion. Why? You can test the effectiveness of your promotion by examining the revenue gained from conversions or evaluating if a calculation breaks even or exceeds advertising fees.

CPI is a standard formula used in business scenarios and analysis, primarily in the inspection of promotions, to identify if a promotion is profitable. You divide the promotion costs by the number of inquiries acquired or received. Also, CPI relates to Per Inquiry Advertising—a form of advertising where ads bring you incoming leads while giving you great exposure. Since Per Inquiry Advertising uses CPI, the two are interchangeably used by most businessmen and economists, depending on how they use it.

CPI is typical in "Cost Per Inquiry Advertising," wherein CPI and per-inquiry advertising combine. Now, "cost per inquiry advertising" is not that different from CPI. What makes them similar is that both use the same method to increase and generate sales using promotions. CPI Advertising is one of the things in business that uses CPI concepts extensively.

CPI Advertising is where companies and economic entities use several marketing strategies such as advertising to generate sales, incoming calls, product or service leads, and other forms of business input. Mainly, advertising works as a form of promotion and increases the business inputs and possible transactions. Per Inquiry Advertising is also referred to as cost per lead, pay per lead, or cost per action advertising.

Examples of Cost Per Inquiry

There are several representations of cost per inquiry. The best example of this is pop-up ads seen in many digital and online platforms such as social media. They are considered forms of CPI Advertising as they encourage the users to click the particular ad, which increases the probability of boosting the sales generated. Another example of a CPI platform is advertisements on TV and mobile platforms.

These specific promotions are forms of CPI platforms because they generate more sales and profit using the least possible budget. Other forms of programs that use CPI as a reference are radio advertising (radio station and program promotions), digital advertising (email, video rolls, etc.), and print advertising (newspapers, magazines, etc.).

CPI is the mathematical equation of the advertising costs divided by the number of inquiries received. Many calculations are also associated with a CPI, but the most common formula is CPI = Advertising Costs / amount of inquiries received. If you're confused about the formula, you can think of it simply as $1,500 taken out of the pocket for restaurant advertisement, and the amount of calls or inquiries received is approximately 300–500, which makes your CPI a total of $3–$5.

Cost Per Inquiry vs. Cost Per Sales

Suppose CPI is the ratio between the advertising cost(s) and the number of inquiries acquired. In that case, Cost Per Sales (CPS) refers to the correlation between the total cost and the total number of sales. The CPS formula is CPS = Total Costs / number of sales. The difference between the two is their usage as a reference.

CPI is used to analyze and generate sales from inquiries and is relative to the done promotion's performance, while CPS is primarily referenced in determining the amount of money, or also referred to as the budget, used in every sale generated.

Even though CPI has many differences compared to CPS, the two also have many similarities. Both use the total cost or budget that a business uses in transactions and negotiations. They are programs or formulations used to increase customer service performance and allow marketers and business entities to increase their inputs and outputs. They also use various platforms in determining each of their factors.