Cost Per Acquisition (CPA)

Cost Per Acquisition (CPA)

Cost Per Acquisition (CPA) is one of the essential metrics for any marketer to track. This parameter will give you information on how much it costs to get new customers. Now, this is different from merely generating leads that express interest in your business. The CPA is concerned about how to spend before a unit product or service is purchased from your business. This metric will let your business know how much revenue is being generated by your marketing efforts. Every business must be able to correctly and constantly track its cost per acquisition. If not, they could end up wasting valuable resources onĀ ineffective marketing.

You need to note that the Cost Per Acquisition of any business is a marketing metric that describes the cumulative cost that a business spends on converting the customer. This metric is not accounted for unless the customer has made a purchase or been successfully converted. The meaning of a conversion varies from one business to another. For some, it may mean a sale, while it may mean a click or download for others.

The importance of measuring the CPA is because it gives you a direct result or feedback that you can use to gauge your performance. This performance is usually measured across different channels. Getting the value for your CPA is quite straightforward. You can do so with the following formula;

CPA = the total cost of a campaign/number of conversions

It’s a good idea to set a target CPA based on the results that you want for your business. To do this, you’ll determine the total amount of money that they intend to spend on ads and reaching customers. Next, you’ll need to determine the number of conversions that you would find appropriate for the advertising budget that you have set aside. It’s essential to set realistic goals or you may only end up putting undue pressure on your marketing team. When you have been able to determine both optimal figures, calculate your optimal CPA and record it. This will be the figure that you’ll use to determine if you have a good, bad or reasonable CPA from your business operations.