AMBASSADOR MARKETING

Cost Per Acquisition: What Is CPA, Best CPA Calculator and Tips to Decrease

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!

TL;DR:

• Understanding CPA: Cost per Acquisition is a vital marketing metric that helps businesses measure the cost to acquire one paying customer, factoring in all marketing and advertising expenses.
• Benefits of Monitoring CPA: Keeping track of CPA allows for more efficient budget allocation, better campaign performance evaluation, and strategic decision-making to improve overall marketing effectiveness and ROI.
• Calculating CPA: To find CPA, sum up all marketing costs and divide by the number of conversions. The result helps assess the cost-effectiveness of different marketing strategies.
• Case Study - Hurom: By rebranding and utilizing influencer marketing, Hurom saw a 65% reduction in CPA and a significant increase in Return on Ad Spend (ROAS).
• Tools and Tips to Lower CPA: The article suggests practical strategies like improving ad relevance, optimizing landing pages, leveraging influencer marketing, and using targeted bidding strategies to lower CPA.
• CPA vs. Other Metrics: CPA is specifically focused on the cost of acquiring paying customers, different from cost per click (CPC) or cost per action (CPA), which may refer to any specified action like clicks or sign-ups.
• Use of Technology and Tools: Utilizing tools like CPA calculators and platforms like inBeat's influencer discovery can streamline the process of managing CPA and enhance campaign outcomes.

What Is Cost Per Acquisition?

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:

• Pay-per-click ads
• Display ads
• Social media ads
• Affiliate marketing
• Influencer marketing
• Email marketing
• Content marketing

And that’s how you can plan for long-term profitability.

Insider case study: Hurom

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:

How Do You Calculate Cost per Acquisition, and What Is a Good Average CPA?

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:

• Industry
• Product type
• Marketing channels
• Whether your business is new

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.

The CPA Formula: CPA = Ad Spend ÷ Conversions

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:

Solid CPA Calculator

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:

• Type in your total marketing spend and the number of conversions.
• The calculator will show you your exact CPA.

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:

Benefits of Calculating CPA

If the Hurom case study didn’t convince you of the benefits of calculating CPAs, here are a few more reasons with examples:

• You get an accurate picture of your marketing and advertising costs: Calculating CPA helps you understand the aggregate cost of marketing campaigns. For example, if your CPA is $50 and you have a marketing budget of $5,000, you can expect to acquire 100 customers. This includes advertising spend and indirect costs.
• You can make informed decisions: We use CPAs and other essential marketing metrics to make data-driven decisions. For instance, if one campaign has a CPA of $30 and another $70, you can transfer more resources to the more cost-effective campaign. The benefit here is that you’re using your marketing budgets efficiently.
• You can evaluate campaign performances correctly: Let’s say you’re running different advertising campaigns and want to see how they stack up against each other. For example, let’s say your Google Ads campaign has a lower CPA than a social media campaign. This tells you Google yields better results for your marketing goals.
• You can improve ROI: Calculating CPA helps increase your return on investment because it’s the direct result of identifying the most effective marketing strategies. So, if content marketing has a lower CPA than paid ads, you might want to focus more on producing valuable content to attract potential customers. And maximize your revenue impact.
• You get more target audience insights: Understanding which segments of your target audience are the most cost-effective to acquire can redirect your marketing strategies to more profitable niches. For example, if Millennials have a lower CPA than Gen Z, you might adjust your advertising campaigns to focus more on millennials.
• You get better benchmarking: Using CPA benchmarks helps you set realistic goals. If the industry average CPA is $60 and your campaign achieves $50, you're performing above average. And that means you’re using effective marketing strategies.

How Do You Track CPA?

Here’s how we track CPAs and advise our clients to:

• Use UTM parameters: Generate UTM link codes for your social media or affiliate marketing efforts. These codes help track the source, medium, and campaign that led to conversions.
• Export PPC campaign data: Export data from platforms like Google AdWords. This data provides insights into how your pay-per-click campaigns are performing and how much you're spending per acquisition.
• Promotional codes and custom links: Use promotional codes or custom links for your internal campaigns. Each code or link can be unique to a specific campaign, so it’s easier to track where conversions are coming from.
• Implement a CRM system: A CRM system can help you track and manage customer interactions and data throughout the customer lifecycle. And that gives you better insights into what’s converting them and at what cost.
• Include a source field on lead forms: Add a field to your lead forms asking customers how they found out about your campaign. This simple addition can fill in gaps in your attribution data and help you understand which campaigns are driving conversions.

8 Ways to Lower Your CPA

Here are ten of our tried-and-tested methods to acquire customers at lower marketing costs.

1. Improve Ad Quality and Relevance

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.

2. Use Influencers

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:

3. Optimize Landing Pages

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.

4. Implement Conversion Rate Optimization

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.

5. Use Target CPA Bidding

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.

6. Adjust Device and Location Bids

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.

7. Schedule Ads for Peak Times

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.

8. Leverage Negative Keywords

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.

9. Enhance Ad Extensions

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:

• Site link extensions: Link to specific pages on your website.
• Callout extensions: Highlight unique features.
• Structured snippet extensions: Provide more context about your offerings.

CPA in Google Ads

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:

• Helps you determine whether your Google Ads campaigns are profitable.
• Provides an accurate picture of your marketing spend effectiveness.
• Helps you make informed decisions about budget allocation.

However, this CPA isn’t set in stone.

There are different bidding strategies to consider.

Bidding Strategies for CPA

• Target CPA Bidding: Google Ads offers a Target CPA bidding strategy, which does what it says. Basically, it allows you to set a target CPA. Google then optimizes your bids to help you achieve this target. This automated strategy uses machine learning to adjust bids based on the likelihood of conversion.
• Manual CPC with Enhanced CPC: You can use Manual CPC bidding in combination with Enhanced CPC (ECPC). ECPC adjusts your manual bids to maximize conversions while trying to keep your average CPA within your target range. This automated bidding strategy aims to get the most conversions within your budget. While it doesn't focus directly on CPA, it can help improve your conversion rates, indirectly affecting your CPA.

Example Scenario

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.

• You set a target CPA of $50.
• If you’re using Target CPA bidding, Google optimizes your bids to try to achieve this CPA.
• Over the month, if your campaign generates 100 conversions, your CPA would be CPA = 5000/ 100 = 50

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.

CPA vs. Other Marketing Metrics [that Use Confusing Acronyms]

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:

What Is the Difference Between CPC and CPA?

• CPC stands for Cost per Click: CPC measures the cost you pay for each click on your ad.
• CPA stands for Cost per Acquisition: CPA measures the cost of acquiring a paying customer.

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:

What Is the Relationship Between CPC and CPA?

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.

Does CPC Affect CPA?

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.

How Do You Calculate CPA from CPC?

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.

Is CPA the Same as CPR?

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 vs Cost per Action

Cost per acquisition and cost per action are often used interchangeably.

And they have the same acronym. No pressure.

However:

• Cost per acquisition refers to the cost of acquiring a paying customer.
• Cost per action can refer to any specified action, such as clicks, sign-ups, or form submissions.

Understanding the context is essential to evaluate your campaign performance accurately and optimize for your specific conversion goals.

Wrapping Up

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.

inBeat, for free

Get your Influencer campaign started.

Book a demo