Definition:
Cost per acquisition (CPA) is a valuation model of online advertising, where the advertiser pays for each conversion achieved. It is the aggregate cost of attracting a customer through a marketing campaign. In this way, the advertiser only pays if the user carries out a conversion.
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Procurement considerations
It must be taken into account that the term acquisition can have different considerations depending on the type of company or campaign that we are carrying out but it will always imply a benefit for our brand so it is an excellent metric to later calculate the return on our investment. An acquisition can be to make a purchase of our product, share a publication, fill out a form, make a phone call or register as a user on a web page.
When calculating whether the CPA is profitable for the advertiser, it is necessary to take into account the benefit of attracting an additional customer. To do this, the advertiser must previously define the monetary value assigned to each type of acquisition. It is important to make an adjusted estimate of this value, because if you inflame it or devalue it excessively it can induce us to make analysis errors.
CPA Formula
The Cost Per Acquisition (CPA) is calculated using the following formula:
CPA = Campaign Cost / Conversions
In the CPA, therefore, it is especially important that all campaigns are results-oriented, and that advertising costs are properly controlled. Because the CPA guarantees higher returns on our economic investments, it is therefore one of the most used payment methods within digital marketing.
When the CPA is used
The CPA is typically used in the following types of campaigns:
- Google Ads and PPC campaigns
- Facebook Ads and Social Media Campaigns
- Affiliate campaigns
- Reporting
The objective is that the cost per acquisition is always lower than the profit obtained with the campaign, always taking into account the lifetime Value (time that a customer is active and buys on a recurring basis). Each type of campaign has its own characteristics and for certain types it is not recommended to use the Cost per Acquisition since it would not work in a current way. In branding campaigns, for example, where our goal has a more promotional character, it is much more advisable to use metrics such as CPM (cost per thousand impressions).
CPA bids in Google Ads
In Google Ads campaigns there is a type of automated bid estimated based on the target CPA. It is a Smart Bidding strategy in which Google, based on the history of the campaign, estimates the amount of the bids to try to achieve the greatest possible number of conversions at the cost per acquisition (CPA) objective established. This type of cost can be applied to all campaigns: display, remarketing, affiliate marketing, etc …
Frequently asked questions about CPA
What does CPA mean in digital marketing?
CPA refers to the concept described in this glossary entry: Definition: Cost per acquisition (CPA) is a valuation model of online advertising, where the advertiser pays for each conversion achieved. When calculating whether the CPA is profitable for the advertiser, it is necessary to take into account the benefit of attracting an additional customer. It gives teams a shared vocabulary for analysing digital projects.
When should teams pay attention to CPA?
Teams should review CPA when it affects acquisition, measurement, user experience, content, automation or campaign performance. The important step is to connect the definition with a real decision.
How is CPA used in a digital strategy?
CPA is used by translating the concept into practical checks: where it appears in the funnel, which data or channel is involved and whether it needs optimisation, monitoring or documentation.
What is a common mistake when interpreting CPA?
A common mistake is using CPA too broadly. It is better to verify the context, the tool or the metric involved before making strategic or technical conclusions.