Cost per action (CPA)advertising, or cost per acquisition, is a metric that measures how much it costs to generate an action through advertising.
In other words, CPA is an advertising model where you only pay when someone takes a desired action.
An action can be anything from a click or form completion, to a review or conversion.
For example, a game development company can run CPA ads for game downloads. This way they only pay for the advertising when people actually download their game and not just view the ads.
Why is Cost Per Action Important?
The key benefit of Cost Per Action (CPA) advertising is that you only pay for results. This means, if you don’t get the desired result, you pay zero in advertising charges.
This saves advertisers money by allowing them to optimise only for their objectives and choosing the right advertising channels to achieve these objectives.
Additionally, CPA advertising simplifies goal tracking. This is because only specific actions are measured.
For example, an advertiser running ads for an ebook download will only track the number of downloads from that particular ad.
How do you Calculate Cost Per Action?
There are a couple of ways to calculate CPA but the simplest way to do it is by dividing the total ad spend by the number of conversions.
CPA = Ad Spend / Number of Conversions
For example, if you spent $500 on an ad and got 100 conversions from the ad, your CPA will be calculated as:
CPA = $500 / 100 = $5
You don’t need to worry too much about this calculation as most advertising platforms will calculate it for you.
How to Lower Your Cost Per Action
Cost per action advertising can be very expensive. Here are a couple of ways to reduce your acquisition cost.
1. Target the Right Audience
This is a no-brainer. If you don’t target the right audience, they are less likely to convert. And if they do convert, it’ll be at a much higher cost.
2. Optimise Your Landing Pages
Make sure your landing pages are optimised to convert. Run A/B tests to improve the different elements on your landing pages.
3. Improve Ad Quality Score
Your quality score is Google’s way of saying your ads are relevant to the audience you’re targeting.
The higher your quality score, the lower your cost because Google wants to give users a better experience even with ads.
4. Use Retargeting
Retargeting ads allow you to run ads to people who’ve visited your website in the past. These people are more likely to convert because you can tailor ads based on the information you have on them. This will ultimately lead to lower acquisition costs.