What is CPA?
CPA, which stands for Cost Per Acquisition (or action), is an advertising term widely used in the PPC industry to measure the total cost to obtain a conversion.
The acquisition in question can be anything from signing up for a monthly subscription or demo or making a single purchase at an online store. It must result in a tangible increase in paying customers for the company.
Every new customer who makes a purchase increases the number of acquisitions by one.
CPA can be an excellent method for many companies to determine how much money a particular ad campaign or marketing method is ultimately earning. This will allow them to pursue their more promising and successful tactics while avoiding unprofitable money sinks.
Cost Per Acquisition (CPA) is a metric used for keeping track of marketing expenses. What is a good CTA? How to calculate it? Keep reading.
Why is CPA Important?
The total CPA will show you how much each acquisition costs the company, in terms of the dollar value of all your marketing expenses.
How to Calculate CPA?
The formula used for CPA calculation is quite simple: take the total cost of all the money spent by the company on advertising of any kind for a specific product. Then, divide that total dollar amount by the number of new conversions gained during that time.
Or, to lay it all out in a more mathematical way:
Cost of Advertising Expenses ÷ Number of conversions = CPA
What Can CPA Tell Me?
Ideally, a company would like the CPA score to be as low as possible. The lower a company’s CPA is for a given advertising campaign, the more overall profit that particular campaign has made for the company.
How Can I Lower My CPA?
There are several methods to lowering a CPA, including:
- Retargeting techniques
- Landing page optimization
- Managing targeting locations
- Leveraging online video
Things to Note About CPA
It can be difficult to define what a good CPA metric should be as marketing costs will vary between industries.
Since there’s no universal metric to compare yourself against, the most practical method of using your data to define a good CPA is to compare the score for a company’s current advertising campaign against the scores for previous advertising campaigns.
Ultimately, it’s a good tool for keeping track of marketing expenses. If CPA suddenly spikes or drops on a new ad campaign, then one way or another, you’ll know it’s worth looking into.
For more information, take a look at our in-depth article about customer acquisition cost (CAC).
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