What is CPA?
CPA stands for Cost Per Acquisition or Cost Per Action and is a term used to calculate the price of acquiring a new customer or a specific action.
CPA can be translated as: Cost per sale or cost per action/conversion.
CPA is used in the context of sales and marketing and is a well-defined KPI for measuring the profitability of your sales and marketing activities.
How is CPA calculated?
CPA is calculated as: Costs / Number of conversions
Where costs are, for example, the sum of marketing and/or sales costs, or for a specific campaign, ad, channel or similar. The same applies to "Number of conversions".
What is CPA used for?
CPA can be used as a top-level KPI to measure the profitability of your marketing and sales in general, or for specific campaigns.
In addition, it can be used to compare the cost of different marketing channels, individual ads, etc., to see where and how you acquire customers at the lowest cost.
How high should your CPA be?
Since CPA represents the price of a new customer/conversion, how high your CPA should be depends on the price of your product and, more precisely, what your CLV (Customer Lifetime Value) is.
The more expensive the product, the higher a CPA you can sustain while still maintaining a profitable marketing and sales strategy.
The advantages of CPA (CPA vs CPC)
The advantage of CPA over, for example, CPC (Cost Per Click) is that CPA only counts people who actually make a purchase. With CPC, you measure the price per click, but do not factor in the quality of that click or the potential customer. Many clicks (CPC) are worthless if they do not result in a purchase (CPA).
Therefore, CPA is a better KPI for measuring profitability and the true cost of acquiring a new customer, compared to CPC, which is better suited for measuring the cost of acquiring a potential customer (a click).
Would you like to optimise your CPA and get more value from your marketing campaigns?
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