Cost per acquisition (CPA) is a marketing metric that calculates the total amount of money a business spends to have a customer perform an action that results in a conversion.
Detailed Explanation
CPA quantifies the investment a company or brand puts in to nudge an individual along the conversion funnel, from the first touchpoint to the end of the consumer journey. Depending on marketing objectives, the performed action could be clicking a call-to-action (CTA), making a purchase, downloading an app, and more.
Here’s how to calculate CPA:
CPA = Total cost of advertising / Number of conversions
Let’s say you spend $2,000 on an advertising campaign to market your online store on Facebook, Instagram and Google. You have 350 conversions at the end of the campaign.
Your CPA will be:
$2,000350 = $5.71
So, you spent $5.71 to acquire each customer during the campaign.
Finding your CPA is important because it offers valuable insight into the efficacy of a business’s marketing efforts. It’s also handy for measuring campaign success and cost efficiency, allowing marketers to optimize their campaigns for improved returns on investments (ROI).