Cost Per Acquisition (CPA) is a metric that measures the aggregate cost to acquire a paying customer on a campaign.
CPA is one of the most important performance indicators for advertisers in online advertising as it relates directly to the end goal of every business process—sales.
The formula to calculate CPA is as follows:
CPA = Total Cost of Campaign / Number of Conversions
Suppose an advertiser spends $5,000 on an online advertising campaign per month, resulting in 100 conversions during a specific month (for instance, purchases made on the company's website). In this case, the CPA of the company for that month can be calculated as follows:
CPA = $5,000 / 100 = $50
This implies that each conversion in the campaign cost the company $50. In other words, it costs the business $50 to acquire a new customer, and hence this is their cost per acquisition.
Use our cost CPA calculator to determine the CPA of your ad campaigns in three easy steps.
A "good" CPA can vary depending on the industry, business models, and conversion rate. While aiming for a good CPA, keep in mind that the average customer lifetime value (CLV) can be an essential metric to determine whether a CPA is "good" or not.
A CPA lower than 30% of the CLV can be considered good since it means the advertiser makes a profit from every new customer. On the other hand, a higher CPA indicates the need for adjustments in your advertising strategy.
CPA measures the aggregate cost to acquire a customer from a specific ad campaign, providing users with an accurate picture of their campaign efficiency. Understanding CPA helps marketers evaluate their advertising campaign and its efficiency across paid marketing channels. This, in turn, allows them to make informed decisions, adjust strategy, and improve marketing efforts for the best result.
The typical cost per acquisition rate can vary depending on several factors such as the industry, market, the advertising platform, conversion rate, and the effectiveness of the marketing campaign.
Several factors, such as target audience, ad quality and relevance, bidding strategy, competition, and conversion rate affect the average CPA. Keep in mind that lowering your cost per acquisition is a good goal, but it’s not the only factor to consider as there are other metrics like lifetime value that affect the profitability of your ad campaigns.
Programmatic advertising is the process of automatically buying and selling digital advertising space. It’s a smarter, faster alternative to manual advertising.
What are CPM, CPC, CPL, CPA, CPV and CPI? Understanding these key marketing metrics is key to making the right choice for your website. Watch Tobin break down each acronym and their meanings for you.
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Programmatic Advertising Jargon GlossaryNavigating ad tech’s acronyms, terminology and jargon can be a challenge. Here are a few definitions of common terms and metrics. You can also check out our extended Ad Tech Jargon Glossary.