A digital advertising metric that measures the total cost an advertiser pays for a single, specified action from a potential customer, such as a sale, lead, or form submission.
Cost Per Acquisition (CPA), also known as cost per action, is a performance-based pricing model where advertisers pay a predetermined price for a specific conversion event. Unlike models that charge for visibility, such as Cost Per Mille (CPM), or engagement, like Cost Per Click (CPC), CPA directly links advertising costs to tangible business outcomes. The 'acquisition' is a predefined action that a user takes after interacting with an ad. This can vary widely depending on campaign goals and may include making a purchase, completing a lead form, signing up for a newsletter, or installing an app. The formula for calculating CPA is straightforward: Total Ad Spend ÷ Total Number of Acquisitions. For example, if a company spends $1,000 on an ad campaign and generates 50 sales, the CPA is $20 per sale.
CPA is a critical metric for evaluating the financial efficiency and profitability of advertising campaigns. It provides a clear measure of how much it costs to acquire a new customer or lead, allowing marketers to assess their Return on Ad Spend (ROAS) with high accuracy. By setting a target CPA based on factors like customer lifetime value (LTV) and profit margins, businesses can ensure their ad spend is sustainable and contributes positively to the bottom line. Optimizing for a lower CPA helps advertisers allocate their budget more effectively, shifting resources towards the channels, audiences, and creatives that deliver the most cost-efficient results. It moves the focus from vanity metrics like impressions or clicks to actions that directly drive business growth.
