Try our Free CPA Calculator to quickly find your cost per acquisition for your digital marketing strategies.

The CPA Formula

The equation for calculating your CPA is:

CPA = Total Cost of Advertising / Number of Conversions

CPA, or Cost Per Acquisition, is calculated by dividing the total cost of an advertising campaign by the number of conversions or acquisitions that result from the campaign.

What Is Cost Per Acquisition (CPA)?

In online advertising, cost per acquisition (CPA) is a special marketing metric that measures the cost of acquiring a customer.

In case the desired conversion is not a purchase but instead it’s a newsletter signup, a link click, a download, etc., CPA can also stand for “Cost Per Action”. 

In our opinion, the metric should have been named “Cost Per Conversion”, but “CPC” was taken by “Cost Per Click”.

Many forms of digital marketing use CPA pricing, where advertisers pay for every time a successful customer acquisition (or action) is generated by an ad campaign. 

For example, PPC ads, affiliate marketing and social media ads use the CPA pricing model.

What Does CPA Tell You?

By calculating the cost of acquiring a new customer and comparing it to the average profit or the lifetime value (LTV) generated by a new customer, businesses can use CPA to determine if their advertising efforts are profitable.

This is why CPA can be a useful tool for businesses looking to optimize their marketing spend and make informed decisions about where to allocate their advertising budget.

Why Is Cost Per Acquisition Important?

Cost per acquisition measures how your marketing campaigns impact your revenue.

Before running an advertising campaign, it’s important to predefine a target CPA (cost per acquisition). This will help you determine the maximum amount you are willing to pay to acquire a new customer. 

To set a realistic target CPA, you should first analyze your profit margins to understand how much you can afford to pay for a new customer. 

Your target CPA should ensure that your ad campaign will be profitable, taking into account the cost of acquiring a new customer and the expected profit margin or LTV from that customer. 

How Does CPA Affect Marketing?

By predefining your target CPA, you can more effectively track the performance of your ad campaign and make informed decisions about how to optimize your marketing spend.

More specifically, the benefits of measuring your CPA include:

1. Optimized campaigns: by comparing your CPA among different types of ads and mediums, you can see what type of ads work best for your audience.
2. Optimized ad budget: monitoring your CPA helps you see the most cost-effective way to get new customers or increase sales, thus investing more in certain ads while pausing or changing the less profitable ads.

One additional thing to consider is that CPA can be used in different ways depending on the business goals. 

For example, if the main goal is to increase brand awareness, the CPA might be less important than other metrics, such as the number of impressions or the number of people reached by the ad. 

On the other hand, if the main goal is to acquire new customers or generate sales, CPA would be a more important metric to focus on.

It’s important to keep in mind the specific goals of the advertising campaign when using CPA as a metric.

How Is CPA Calculated?

CPA, or cost per acquisition, is calculated by dividing the total cost of an advertising campaign over a certain period by the number of conversions or acquisitions that result from the campaign during the same period.

Remember the formula for calculating CPA:

CPA = Total Cost of Advertising Campaign / Number of Conversions

For example, if an advertising campaign costs $1000 and results in 100 conversions, the CPA would be $10 ($1000 / 100 conversions).

To find the real cost of an advertising campaign, you need to include all associated expenses, including marketing staff salaries, creative design costs, etc.

In addition to calculating CPA, it can also be helpful to compare the CPA to the average profit or lifetime value (LTV) generated by a new customer. 

This can help you to determine if the advertising campaign is generating a positive return on investment (ROI).

What Is A Good CPA Rate & What Are Some CPA Examples?

Here are a couple of examples ti understand the Cost Per Acquisition metric (CPA)

1. CPA Example #1

If an e-commerce business runs ads to its products, and pays $5000 in ads to attract 100 paying customers, that would lead to a CPA of $50.

2. CPA Example #2

Another example would be an online course business that spend $1000 in ads to get 4 customers, leading to a CPA of $250.

But that does not necessarily paint the whole picture. First of all, other costs should be included in the calculation, e.g. the resources that were used to prepare the ad creatives and/or the landing pages for the ads.

Given that the ROAS (Return On Ad Spend) is often not very high, if a business fails to incorporate these costs in its CPA calculation, it might make the difference between being profitable and bleeding money.

Also, from the examples above, it may seem like the e-commerce business is doing a lot better with its ads, if we only look at the CPA.

But, the CPA should always be evaluated along with the LTV (lifetime value) and/or the AOV (average order value) of the customer.

If, for example, this e-commerce business sells $30 products, then a $50 CPA makes it clear that the business can’t run ads profitably. 

On the other hand, if the online course business sells a $1000 product, with a 90% profit margin, then it can and should scale its ads as much as possible, as they would be highly profitable.

So, keep in mind that different businesses may have different benchmarks for what constitutes a “good” CPA rate. Generally, a lower CPA is better, but it also depends on the industry, product, and target market.

Also, it’s important to keep in mind that CPA is a metric that can be improved over time through testing and optimization of ad campaigns and/or landing pages.

Therefore, a CPA that is higher than desired initially may decrease as optimizations are made.

Tracking CPA

There are various ways you can track your CPA. 

The analytics tools integrated into the ads interface of every platform typically show the CPA for every ad and campaign - provided that it’s linked with your website via Facebook Pixel, Google Analytics code, etc.

• UTM parameters that generate special links for each ad.
• Google Ads reports where you can design your own automated comparisons between your chosen data.
• Custom links that you can incorporate into your internal campaigns.

How To Lower Cost Per Acquisition (CPA) Costs

There are several strategies that can be used to decrease your CPA (cost per acquisition) for an advertising campaign.

CPA Targeting

One of the most effective ways to decrease your CPA is to improve your targeting. 

Make sure that your ads are being shown to the right people, at the right time, in the right place. You can use demographic data, location data, and other targeting options to reach the people most likely to convert.

Ad Creative And Landing Pages (And How They Affect CPA)

Make sure your ad creative and landing pages are optimized for conversions.

Here are some things to consider when optimizing your ads:

• Test different headlines
• Test different copies
• Try various images
• Make different call-to-action buttons to see which ones perform best. 

Also, take into account what kind of user your ads and landing pages attract – you want the people who will become paid customers, not just people who click on your ads (like Instagrammer @Arii that couldn’t sell 36 T-shirts to 2.6 million followers :horror:).

Target CPA Bidding

Use bid management tools to optimize your bids in real-time, and ensure that you are not overpaying for clicks or conversions.

Campaign Optimization That Enhances Your CPA

Continuously monitor your campaigns, track your metrics, and make adjustments as needed. This may include pausing underperforming ad groups, keywords or targeting, and scaling up those that are working well.

Remarketing Can Elevate Your CPA

Use remarketing campaigns to target people who have interacted with your website or mobile app in the past. Remarketing can help you increase your conversions and decrease your CPA.

Reduce Fraud For Precise Cost Per Acquisition

Fraudulent traffic can inflate CPA. Be sure to use fraud detection and prevention tools to identify and eliminate any fraudulent traffic on your campaigns.

Diversify Your Traffic Sources For Best CPA Results 

It’s also a good idea to diversify your traffic sources. You don’t have to rely on Meta or Google ads alone, like many businesses do. Test other sources of traffic like YouTube ads, and TikTok ads, and discover the best-performing sources for your brand.

Tip: Reduce Your CPA Cost

 One final trick would be to never test brand new landing pages and funnels with paid traffic. Usually, in the early stages of a marketing funnel there are a lot of important tweaks to be made.

This is why it’s always a better idea to direct traffic from another source (e.g. email marketing) to the new funnel and test how it does. 

Once the main tweaks have been made, then you can launch the new funnel with paid traffic, avoiding the really high CPAs that usually come along with new campaigns.

CPA Using CPC Calculator

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CPA Using CPC

The equation for calculating your CPA through your CPC is:

CPA = Cost Per Click (CPC) / Conversion Rate

In this case, CPA, or cost per acquisition, is calculated by dividing the cost per click of an advertising campaign by the conversion rate achieved through the campaign.

Note: The Conversion Rate should be used as a decimal. For example, if your Conversion Rate is 10%, then the calculation used 0.10.

Of course, our CPA using CPC calculator takes care of this behind the scenes.

Where Can CPA Be Used?

CPA, or Cost Per Acquisition, is a metric that measures the cost of acquiring a customer. Industries and/or campaigns where CPA can is widely used include:

E-Commerce CPA

The cost of acquiring a customer through an online store or marketplace. It can include the cost of advertising, website design, and customer service.

Lead Generation CPA

The cost of acquiring a lead through a form fill, survey, or contact request. This may include the cost of creating a landing page, form, and other lead-gen tools.

Affiliate Marketing CPA

The cost of acquiring a customer through an affiliate marketing campaign. It can include the cost of commissions, bonuses, or other incentives for affiliates to drive sales or leads.

Social Media CPA

The cost of acquiring a customer through social media advertising or influencer marketing campaigns.

Email Marketing CPA

The cost of acquiring a customer through email marketing campaigns, including costs associated with creating an email list and sending email campaigns.

In-App CPA

The cost associated with acquiring a customer through mobile app advertising.

Retargeting CPA

The cost of acquiring a customer through retargeting campaigns, which are designed to target people who have previously interacted with a business’s website or mobile app.

What Is The Difference Between CPA And CPM?

CPA stands for “Cost Per Acquisition” and refers to the cost of acquiring a customer or converting a visitor into a paying customer. 

CPA is a critical metric in advertising, as it helps to measure the effectiveness of an advertising campaign in terms of the cost required to acquire a new customer.

CPM stands for “Cost Per Mille”, also called “Cost Per Thousand Impressions”, and refers to the cost of displaying an advertisement to a thousand visitors. 

Impressions refer to the number of times an advertisement is displayed to a user, regardless of whether the user interacts with the ad or not.

This metric is often used as a pricing model for online advertising, where advertisers pay a fixed price for every thousand times their ad is displayed. 

CPM is typically used to measure the effectiveness of an advertising campaign in terms of the number of people who see the ad.

One additional thing to consider is that while CPM is often used to measure the reach of an advertising campaign, it does not necessarily reflect the effectiveness of the ad in terms of generating conversions or sales.

On the other hand, CPA is specifically focused on measuring the cost of acquiring a customer and can be a more useful metric for evaluating the overall ROI (return on investment) of an advertising campaign.

CPA Vs. CPM

In summary, CPA measures the cost of acquiring a customer, while CPM measures the cost of reaching a thousand people with an advertisement.

What Is The Difference Between CPA And CPC?

CPC stands for “Cost Per Click” and refers to the cost of an advertisement campaign when the user clicks on an ad. 

This is a pricing model used in online advertising, where the advertiser pays each time someone clicks on one of their ads. 

CPC is often used as a metric to measure the effectiveness of an advertising campaign in terms of how many people are actually clicking on the ad and visiting the advertiser’s website.

The key difference between CPA and CPC is that CPA takes into account the entire customer journey, including the time and money spent on converting a visitor into a paying customer.

On the other hand, CPC only measures the cost of the ad click, and doesn’t provide any information on what happens after someone clicks on the ad.

There is a reason CPC is the most popular type of ad campaign in digital marketing, though. It is a low-risk approach for advertisers, as they only pay when someone clicks on their ad. 

This means that advertisers can control their ad spend and avoid paying for ad impressions or views that don’t result in clicks.

CPA Vs. CPC

In summary, CPA measures the cost of acquiring a customer, while CPC measures the cost of an ad click. 

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While CPA looks at the whole customer journey, CPC looks at the cost of each ad click and can be seen as a metric of how many people are interacting with the ad.

What Are The Benefits Of Using A CPA Calculator?

A CPA (Cost Per Acquisition) calculator can be a valuable tool for businesses looking to measure and optimize the effectiveness of their advertising campaigns. 

Here are some of the benefits of using a CPA Calculator:

Easy to Use: A CPA calculator is a simple tool that allows you to input your ad spend and the number of conversions to quickly calculate your CPA. It eliminates the need for manual calculations and makes it easy to track and analyze your campaign performance over time.

Accurate Data: A CPA calculator provides accurate data by automatically calculating your CPA based on the information you provide. This eliminates the risk of human error, which can lead to inaccurate data and poor decision-making.

Track Return on Investment (ROI): CPA calculators can be an effective tool for tracking the return on investment (ROI) of your advertising campaigns, which is a key metric for determining the profitability of your business.

Helps decision-making: CPA calculators can also help to determine if it is worthwhile to continue running a campaign or if the CPA is too high and the business will lose money.