CPA (cost per acquisition)

The formula

• CPA = K / n

K is the advertising cost and n the number of conversions it led to. A conversion is whatever the campaign was meant to produce: a purchase, a sign-up, a booked call. The page says acquisition; cost per action and cost per lead are the same division with another event counted.

A worked example

A campaign costs 5,000 and leads to 125 purchases: CPA = 5,000 / 125 = 40. If the same money had brought 50 purchases, the CPA would be 100.

The ceiling

A CPA means little on its own; it is read against what a conversion is worth. A product sold at 300 with a 25% profit margin earns 75 before advertising, so a CPA above 75 loses money on the first purchase and a CPA of 40 keeps 35 of it. With repeat purchases the ceiling is the customer lifetime value instead of one margin.

From clicks to conversions

CPC and CPA are tied by the conversion rate. At a CPC of 2 and a conversion rate of 5%, 100 clicks cost 200 and give 5 conversions, so the CPA is 200 / 5 = 40: CPA = CPC / conversion rate.

CPA or CAC

CPA counts the advertising spend alone, per conversion, campaign by campaign. CAC counts all marketing and sales costs in a period, salaries and tools included, per new customer. A conversion is not always a new customer either: a returning buyer counts in n here and not in CAC.

Common mistakes

• Counting clicks or leads as conversions when the campaign was priced on sales. Say which event n counts.
• Leaving the view-through sales out, or in, without saying so. Attribution decides n, and two reports with different rules give two CPAs for one campaign.
• Mixing periods. A sale that lands a week after the campaign belongs to its n only if the report’s window says so.

Frequently asked questions