CPA (Cost per acquisition)

Marketing Glossary / CPA (Cost per acquisition)

CPA is a marketing metric that denotes how much it costs to acquire a new customer or conversion. The data is used frequently by businesses to drive user acquisition and growth through improved decision-making, such as how to allocate your marketing budget and how to optimize the marketing funnel.

What is CPA?

Cost per acquisition (CPA), also known as cost per action, is a marketing metric used to measure the cost of acquiring a new customer, conversion, or desired action. It tells you the cost of acquiring the customer across the entire journey – from initial contact to their first conversion.

CPA is calculated by dividing the total cost of a marketing campaign by the number of acquired customers. CPA is an important metric for businesses because it provides insights into the efficiency and effectiveness of their marketing efforts. By tracking CPA, companies can determine the most profitable marketing channels, optimize their marketing spend, and drive growth.

CPA can also be defined as a pricing model, whereby advertisers and marketers pay publishers per conversion or action.

How to calculate CPA

Calculating your Cost Per Acquisition (CPA) is an important step to assess the success of your marketing campaigns. 

To calculate CPA, you’ll need to add up all the costs associated with running the campaign – such as advertising, promotions, and commissions – and then divide that number by the number of customers acquired or conversions made. 

The cost per acquisition (CPA) of a marketing campaign can be calculated using the following 

formula:

CPA = Total Cost of Marketing Campaign ÷ Number of Acquisitions

For example, if a company spends $1000 on a marketing campaign and acquires 100 customers, their CPA would be $10 ($1000 ÷ 100). This allows you to compare your CPA to the average revenue generated per customer, so you can determine how effective your investments are in terms of return on investment (ROI).

Why is CPA an important marketing metric?

Measuring CPA is essential for successful marketing and advertising. CPA gives an indication of how much a business spends to acquire customers or leads – the lower the cost, the higher the return on investment. 

CPA helps digital marketers keep an eye out for any fluctuations in conversion rates, as well as identify the overall health of the campaigns they create. CPA is also used to pinpoint which channels and strategies are working well and which ones need refinement or improvement over time. 

Knowledge of a campaign’s CPA can ultimately improve businesses’ bottom lines by helping them prioritize investments that drive growth and reach key performance indicators (KPIs). CPA can be calculated alongside other key metrics such as return on investment (ROI), conversion rate (CVR), and return on advertising spend (ROAS). 

CPA vs CPC (cost per click)

CPA (Cost Per Acquisition) and CPC (Cost Per Click) are two distinct metrics used to evaluate the success of online marketing campaigns. 

CPA indicates the cost of acquiring a customer or a conversion, taking into account all expenses related to the campaign, such as advertising on multiple channels and creating SEO content. It gives an overall view of the marketing effort, enabling businesses to calculate their return on investment. 

On the other hand, CPC measures how much each click costs within an ad campaign and is typically used for PPC advertising – businesses only pay when their ads are clicked. This model helps to understand the cost of each website visitor and provides insight into the efficacy of ad campaigns in terms of traffic generation.

In short, CPA and CPC offer different solutions for online marketing teams. Businesses must choose which metric works best with their goals in mind – whether it’s measuring the effectiveness of a wider marketing strategy or focusing more closely on driving targeted traffic.

What is a good CPA?

Generally, a CPA figure deemed to be “good” should be lower than the average revenue generated per customer. 

The average CPA varies greatly, depending on numerous factors such as industry, product type, marketing effort, ad platform used, and more. Marketers need to consider reviewing CPA figures regularly to evaluate overall performance and make adjustments where necessary in order to reach the desired CPA goal.

Unfortunately, there is no standard benchmark you can measure it against – it will vary depending on the industry, products, and pricing. A good rule of thumb is that the lower the cost, the better. You can also compare your CPA to customer lifetime value (CLV), i.e. the total amount of money customers are likely to spend over their relationship with a company or brand. The lower your average cost per acquisition is compared to CLV, the more successful your campaign will be.

The average CPA for a PPC (pay-per-click) campaign could be anywhere between $10 and $120, depending on the industry, product, channel, and target audience. However, the figures can be broken down by industry and channel, as will be shown in the next section.

What are the benchmark CPAs by industry?

You will find the benchmark CPA values for a variety of industries on different advertising channels (Facebook ads, Google search ads, and Google display ads) below.

Here are the average CPA values for ad campaigns in various industries and platforms, according to WordStream:

Facebook

Google Search

Google Display

Cost per acquisition example

For an example of a campaign that generated a good CPA, you need to look no further than Babbel and their partnership with Outbrain.

Babbel, a language learning app with over one million active subscribers globally, used advanced targeting tactics and quality content to generate actionable leads at efficient CPAs. Lookalike Audiences drove a 20% lower CPA and retargeting campaigns generated 4.6% lower than initial goals – an impressive result. Outbrain provided a full-funnel solution for Babbel, helping them reach their native platform goals with owned media campaigns.