What is CPA?
Cost Per Acquisition (CPA) is an ecommerce metric that measures the aggregate cost of acquiring a paying customer on a marketing campaign.
While conversion metrics give an impression of campaign success, CPA can reveal whether the campaign was financially successful when used in conjunction with revenue-based metrics. For example, the value of a lead or customer lifetime value.
CPA is used to measure success across a variety of paid marketing channels, including: Paid search, affiliate, display and social media advertising. Find out your Cost Per Acquisition or how you could improve PPC performance with our PPC/CPA calculator.
How do you calculate CPA?
The formula for cost per acquisition is equal to your total ad spend divided by total attributed conversions. A simple CPA calculation can be expressed like this:
Figuring out your attributed conversions is why you need to know impressions, CTR and conversion rate.
How do you reduce CPA in Google Ads?
Benchmarking CPA is challenging. Not only does every online business have different margins, prices, ad platforms and expenses, the averages vary depending on the market. Difficult benchmarks make reducing CPA in the abstract quite challenging.
In order to create your own CPA benchmarks, consider the following:
You’ll be unsurprised to discover that less budget means a more conservative ad spend. If you’re limited by your margins, focus on the easy targets. We’re talking high-converting terms and brand queries.
Advertising isn’t limited to PPC ads you see on the top of the search results. Affiliate marketing, email, social media and content marketing all have a variety of associated costs and likely outcomes. For example, social media advertising may not produce long term results, but is ideal for seasonal campaigns and brand awareness.
Which brings us to our final consideration…
How are you defining “Acquisition”?
Most ecommerce businesses measure CPA against the number of paying customers. It’s acquisition in every sense of the word. But CPA is a metric that can be applied to a variety of conversion actions. This is also why CPA can also stand for “Cost Per Action”.
Other conversion actions include brochure downloads, direct mail listings, enquiry form submissions and even telephone calls. Unless you are able to accurately put a value on prospects like this, try and keep CPA as a metric for sales alone. Remember, CPA is best for measuring direct costs and direct remuneration.
Cost Per Acquisition FAQs
Some people call CPA “cost per conversion”, because they use the terms acquisition and conversion interchangeably. But, thanks to Google Ads, CPC is already taken: It means Cost Per Click. As discussed, CPC is the average cost you pay Google for each click on your ad. It’s related to Cost Per Acquisition, but it isn’t the same thing.
Target CPA is an automatic bidding strategy in Google Ads. It is one of Google Ads’ automation options, designed to make your PPC management easier. It uses a preset CPA target to define the limits and goals of its automated bidding.
For example, if you want to spend £30 to acquire each conversion you would simply turn on Target CPA bidding and set the target to £30. This can be extremely effective for advertisers looking to preserve their profit margin.
In accounts where enough data is available, Target CPA bidding can have great results in reducing your cost per acquisition. It uses machine learning in conjunction with the target you have set to optimise your bids to ensure you are returning leads at a rate that is profitable for your business.
Find out more about Flexible Bidding Strategies.
Tracking customer journeys and CPA accurately on your various marketing channels is tricky… but very important. Having accurate CPA tracking allows you to attribute sales to specific channels. This will help you refine your ad campaigns, showing you where to reinvest your budget and where to cut back.
Find out more about attribution models.