Success is often measured by how efficiently a campaign drives valuable customer actions. Cost per Acquisition (CPA) is a metric that helps marketers evaluate the financial performance of their campaigns. Whether it’s a sale, sign-up, or download, understanding CPA is essential for optimizing budgets, increasing ROI, and scaling campaigns effectively.
What is the Cost per Acquisition?
Cost per Acquisition (CPA) is a key performance indicator (KPI) that reflects the total cost required to convert a prospect into a customer or lead. Unlike general metrics such as impressions or clicks, CPA focuses on actual outcomes that generate value for a business.
Marketers calculate the CPA to assess the average amount of money an advertiser spends to achieve a desired action, such as a purchase, registration, or app installation. Cost per acquisition is mostly used in performance marketing models where advertisers only pay when the defined action occurs.
Why is Cost per Acquisition Important?
CPA is critical for evaluating the efficiency and profitability of advertising campaigns for several reasons:
CPA enables marketers to optimize budgets. Brands can use CPA to identify which channels or creatives drive conversions at the lowest cost, allowing for smarter budget allocation.
CPA provides a clear view of return on investment and campaign success. Also, this metric ensures that campaigns are aligned with business goals, instead of vanity metrics, like reach or clicks. CPA also helps advertisers decide whether a campaign can be scaled over time
How to Calculate CPA
Calculate cost per acquisition with this formula:
CPA = Total Cost of Campaign
Number of Acquisitions
The Total Cost of the Campaign is the total amount spent on advertising.
The Number of Acquisitions is the number of completed desired actions.
For example:
If you spent $1000 on a campaign that resulted in 50 purchases, your CPA would be:
$1000 / 50 = $20 CPA
What is a Good Cost per Acquisition?
While there is no universal benchmark for a “good “ CPA, there are factors that influence what constitutes a positive CPA:
- The industry: High-ticket industries, like insurance or B2B software, typically have higher acceptable CPAs than retail or e-commerce.
- The Customer Lifetime Value (CLV): A CPA is considered good if it’s significantly lower than the revenue generated by a customer over time.
- Sales funnel stage: Acquisitions closer to the bottom of the funnel tend to have higher CPAs than top-of-funnel actions.
- Channel Costs: Platforms such as Google Ads, Facebook, and LinkedIn may have different CPA averages due to competition and targeting options.
CPA vs CPC
People often confuse CPA with Cost per Click (CPC), but they measure different aspects of a campaign:
CPC (Cost per Click) measures how much you pay each time someone clicks on your ad.
CPA (Cost per Acquisition) measures how much you pay to achieve a specific action, which may include a click but can also be a conversion, sign-up, or download.
Typically, CPA emphasizes the end result (conversions). A high CPC doesn’t mean there will be a high CPA, and vice versa. A campaign might have a low CPC but fail to convert, resulting in a high CPA. Alternatively, a higher CPC campaign with a strong conversion rate can yield a low CPA.
For example:
- Campaign A: $0.50 CPC, 1,000 clicks, 10 conversions → CPA = $50
- Campaign B: $1.00 CPC, 500 clicks, 25 conversions → CPA = $20
In this case, Campaign B has a higher CPC but a more efficient CPA, highlighting the importance of tracking CPA over CPC when measuring performance.