What is Cost Per Acquisition ?
Cost Per Acquisition is an e-commerce advertising term sometimes referred to as CPA. It has different significance depending on the actions that are meant to be tracked.
One common application of Cost Per Acquisition is measuring the aggregate cost to acquire one paying customer. This is calculated on a campaign or channel level. Unlike metrics such as conversion rate, Cost Per Acquisition is a financial metric. It measures how much revenue has been earned through a marketing effort, effectively measuring its success. If the Cost Per Acquisition is low, the campaign has been effective.
Cost Per Acquisition can be tracked through the use of UTM and custom links, CRM software, surveying customers to find which channel they used, or exporting and analyzing raw campaign data.
Cost Per Acquisition can also signify Cost per Action. In this case, it’s a payment model in which the advertiser only pays a fee when the user performs an action (e.g. signs up for the email list, buys a product, etc.).
An important factor with Cost Per Acquisition is search engine optimization. If a website receives organic traffic through SEO, the Cost Per Acquisition will be much lower.
The financial CPA is calculated by dividing the acquisition cost by conversions (CPA = cost/conversions) to show the final cost per acquisition.