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We run an influencer discovery platform and have worked with over 200 brands.
We’re not bragging.
We just had plenty of time to think about how businesses track the cost of getting new customers.
It’s one of those things that can make a huge difference in how you plan and spend your marketing budget.
For example, cost per acquisition tells you how much it costs to get one paying customer, which can help you figure out if your marketing is working as well as it should.
In this article, we'll break down what CPA is, why it matters, and how you can calculate it.
Plus, we’ll go over the benefits of keeping an eye on your CPA and share some tips on how to lower it.
All this will help you make smarter choices and improve your bottom line. Let’s dive in!
Cost per Acquisition (CPA) is a marketing metric that measures the cumulative costs to acquire one paying customer.
Remember: This includes all marketing costs and advertising expenses associated with getting a potential customer to complete a conversion goal.
You can even include indirect expenses like content production.
You can use it to measure various marketing efforts, like:
And that’s how you can plan for long-term profitability.
One of our clients, cold-press juicer brand Hurom, came to us with massive CPAs.
We immediately knew something was wrong with their marketing efforts and strategies across (possibly all) marketing channels.
So, we analyzed their previous marketing campaigns.
Problem identified: Hurom adopted a discount-based model to sell its products.
Unfortunately, its ads were causing too much fatigue.
Solution: We helped Hurom build a new brand image, focused on making health easy.
And we used plenty of influencer marketing content, like the one below:
Results: 65% reduction in CPA and 2.5X more ROAS
Now, let’s tackle this question:
To calculate cost per acquisition, add up all your marketing costs and divide by the number of conversions.
A good average CPA depends on several factors, including:
Generally, a lower CPA indicates more cost-effective marketing efforts.
However, a low CPA is not always good.
For example, a low CPA that comes from targeting inexpensive products with low-profit margins may not be awesome.
That’s because a low CPA for low-priced items might not cover the customer acquisition cost or contribute to long-term profitability.
On the other hand, a low CPA for expensive products can be excellent because it shows you’re using your advertising budget efficiently.
So, how do you know if your CPA is good?
You need to look at the bigger picture, which includes other variables, like the customer lifetime value and your overall business profitability.
Take this example.
We have a client who wanted to understand the cost of their advertising efforts.
They spent $10,000 on an influencer campaign and acquired 2000 new customers.
By dividing the total advertising spend by the number of new customers, they found their CPA to be $5.
Insider tip: Those results aren’t too good to be true.
It’s the power of influencer marketing for sales.
Our free influencer marketing ROI calculator shows you the impressive reach you can get from this investment:
And we have many other marketing tools in our free toolkit, like this:
You can use the cost per acquisition formula above, but it’s much easier to use this free CPA calculator.
Side note: We also use it to measure different campaigns we’re tackling, and our clients appreciate it as well.
Our clients also use it to assess campaign performance, optimize marketing spend, and make informed decisions.
Here’s how easy it is to use:
Bonus: Use the advanced mode to compare two or more campaigns.
This comparison will help you identify effective strategies, optimize marketing costs, and improve conversion rates.
This brings us to the next point:
If the Hurom case study didn’t convince you of the benefits of calculating CPAs, here are a few more reasons with examples:
Here’s how we track CPAs and advise our clients to:
Here are ten of our tried-and-tested methods to acquire customers at lower marketing costs.
High-quality ads that are relevant to the searcher's intent tend to perform better.
They attract more clicks and higher conversion rates.
One of our agency’s clients, New Balance, did exactly that:
Again, the agency used influencers you can easily find on our discovery platform.
Pro tip: The influencers used keywords that matched the searcher's intent and wrote compelling ad copy that highlighted the brand’s unique selling points.
Using influencer marketing is a smart way to lower your CPA.
Here’s why: Traditional ads can cause ad fatigue, where people start tuning out repetitive messages.
Influencers, on the other hand, create fresh, engaging content that grabs attention and leads to higher conversions.
They connect with your target audience in a more genuine and relatable way, which leads to better engagement and a lower CPA.
For example, Genomelink reduced its CPAs by 73% using influencers.
Background story: This ancestry app was struggling with rising CPAs due to creative fatigue and outdated image/carousel ads.
The leadership set a tighter cost of customer acquisition because of tough economic conditions.
Platforms like TikTok, which are hungry for fresh content, were quickly burning through their creatives.
But we helped them connect with various influencers, testing multiple hooks, calls to action, spark ads, voiceovers, and actors:
At inBeat, we help you find the right influencers for your brand.
Our discovery platform makes it simple to connect with influencers who match your campaign goals and audience.
You just need to select the keywords and filters and press the “OK” button:
A well-designed landing page that matches the ad content can significantly increase conversion rates.
Ensure your landing pages load quickly, are mobile-friendly, and have a clear call-to-action.
For example, if your ad promotes a 20% discount on summer dresses, the landing page should prominently display summer dresses and the discount offer.
Pro tip: Include customer reviews and high-quality images to build trust and interest.
CRO involves systematically testing different elements of your website and ads to improve the percentage of visitors who complete a desired action.
Do the math: If you double your conversion rate, your CPA could potentially be halved, assuming the same ad spend.
So, test different headlines, images, and CTAs on your landing pages.
If you find that a "Buy Now" button in red converts better than in blue, you can implement that change site-wide.
Insider tip: Our sister agency always tests different ad variations to zero in on high-performing content.
And we advise our clients to test different influencer ad hooks to decrease the bounce rate and increase view time.
For example, we helped NYC to leverage TikTok Influencers and Spark ads to reach young voters:
Just ten local creators led to over 2.5 million views and a 70% average view-through rate.
Target CPA bidding is an automated Google Ads strategy we’ll discuss in a second.
But basically, it sets bids to help you get as many conversions as possible at or below your target CPA.
Let’s say your target CPA is $20.
Google Ads will automatically adjust your bids to maximize conversions at that cost.
This could mean bidding higher on keywords that convert well and lower on less effective ones.
Basically, Google leverages machine learning so you can achieve a more predictable and lower CPA.
This strategy is especially useful in highly competitive markets.
Not all devices or locations perform equally.
That means you can adjust your bids to favor the best-performing devices and locations.
So, if mobile users convert at a higher rate, you should increase bids for mobile traffic.
Similarly, if users in urban areas have a higher conversion rate, adjust your location bids accordingly.
Optimizing bids based on performance data directs more budget towards higher-converting traffic, reducing your CPA.
Ads shown during peak times when your audience is most active can yield better results.
It’s obvious – that’s because more potential customers see your ads.
So, analyze data to determine these times and schedule your ads accordingly.
Negative keywords prevent your ads from showing on irrelevant searches.
That means your budget will be spent on high-quality traffic.
Let’s say you sell premium leather shoes.
In this case, you should add “cheap” or “free” as negative keywords to avoid attracting bargain hunters who are unlikely to convert.
Ad extensions provide additional information that can make your ads more attractive and increase click-through rates.
And higher CTR and conversion rates lead to lower CPAs.
For instance, use:
Cost per acquisition in Google Ads represents the cost you incur for each conversion, such as a sale or a sign-up.
You calculate it by dividing your total ad spend by the number of conversions.
Knowing your CPA:
However, this CPA isn’t set in stone.
There are different bidding strategies to consider.
Suppose you have a Google Ads campaign with a monthly budget of $5,000.
And you’re aiming to acquire new customers for an online subscription service.
Remember: Don’t take this as an easy win.
Even if you reach your target, you should keep monitoring and adjusting your campaign based on performance data.
The end goal is to refine your strategy to achieve even better results and a more profitable CPA.
If you read so far, you now have a pretty good idea of what CPA is.
However, other metrics you can confuse it with include cost per click, cost per action, and cost per response.
Let’s see if we can decipher these intricate acronyms together:
Basically, these are distinct metrics because CPC focuses on traffic generation, whereas CPA focuses on conversions.
Of course, you should understand both metrics to assess your advertising campaigns’ performance.
Here are a few more questions you can ask at this point:
CPC and CPA are interrelated.
A lower CPC can lead to a lower CPA if the conversion rate remains consistent.
However, a low CPC doesn't always guarantee a low CPA.
Your ad must be persuasive to convert clicks into paying customers.
That’s why you should keep an eye on both metrics to optimize your marketing strategies.
Yes, CPC affects CPA.
If you reduce your CPC while maintaining or improving your conversion rate, your CPA will likely decrease.
However, simply lowering CPC without considering conversion rates may not result in a lower CPA.
We advise our clients to focus on both attracting clicks (CPC) and converting those clicks into customers (CPA) to ensure campaign success and cost optimization.
To calculate CPA from CPC, you need the conversion rate.
The formula is:
CPA = CPC / Conversion Rate
For example, if your CPC is $2 and your conversion rate is 5%, the CPA would be:
CPA = 2 / 0.05 = 40
This formula is limited, but it helps you understand the cost of acquiring a customer based on your CPC and conversion rates.
As a result, you can do better budget allocation and reach marketing success faster.
No, CPA (Cost per Acquisition) is not the same as CPR (Cost per Response).
CPA measures the cost to acquire a paying customer, while CPR measures the cost to receive a response or engagement, such as a click or form submission.
That means CPA focuses on the end goal of acquiring customers, though CPR can include various actions leading up to a conversion.
Both metrics are useful but serve different purposes in evaluating marketing efforts.
Cost per acquisition and cost per action are often used interchangeably.
And they have the same acronym. No pressure.
However:
Understanding the context is essential to evaluate your campaign performance accurately and optimize for your specific conversion goals.
Understanding and managing your cost per acquisition can make a big difference in how effective your marketing efforts are.
When you know where your costs are going to, you can make smarter decisions that boost your bottom line.
So, remember that we’ve got a solid free CPA calculator to help you get started with your CPA calculations.
Use it in combination with our other marketing calculators to understand where your marketing dollars are going.
And if you're looking to lower your CPA, our influencer platform can connect you with influencers who can drive high-quality traffic and conversions.
Don’t wait — try our free calculators today and see how inBeat can help you find the right influencers to optimize your marketing campaigns.
