Cost Per Acquisition: How to Calculate, CPA Example, the Latest Trends and More!
Hey all digital marketers, listen! There’s a secret to supercharging your ROI. It’s called CPA marketing.
Known about that terms before? Then congrats! However, we bet hardly someone knows what Cost Per Acquisition Formula is and how much you should spend for an ideal CPA? Even there’ll be noobs with no idea about what CPA affiliate marketing is.
If you are among those who live under the rock, this article by Dynu In Media is for you.
NOW, let’s Read and Learn!
What Is Cost Per Acquisition Marketing and How Does It Work?
In fact, there are many acronyms to remember in online marketing, but one of the most crucial metrics you must deeply understand is Cost Per Acquisition (CPA).
What Is Cost Per Acquisition Marketing?
Cost Per Action Marketing, also called Cost Per Action or CPA is a marketing metric that measures the total cost of acquiring conversions on a specific campaign. In other words, this method allows advertisers to know the marketing performance and then solely pay for the real results. The result can be very diverse, from purchasing to signing up, filling out a form, downloading an app, or inquiring about a quotation.
Simply put, when advertisers want to only pay for things that can be turned directly into cash in their pockets, Cost Per Action Advertising jumps into the game.
CPA Affiliate Marketing Insider – How Does Everything Work?
The 3 parties in CPA Affiliate Marketing
A typical CPA affiliate marketing model will consist of three essential parties:
- Advertiser is the first party that urges a need to promote their brand or products. On the other hand, there will be specific platforms or influencers with a large pool of audiences. These people are called Publishers.
- And intermediaries, or CPA networks, appear to bond advertisers and publishers together.
How does Cost Per Action Affiliate Marketing work?
To be short, businesses utilize CPA networks to collaborate with publishers for promotion purposes.
In return, publishers have a chance to convert traffic into dollar signs. It is a mutually beneficial relationship, a win-win!
How to Calculate CPA? CPA Formula Is so Easy…
Why on Earth do I need a Cost Per Acquisition Formula?
We stated above that the relationship between Advertisers and Publishers is a win-win, right? However, evaluating whether a CPA Marketing campaign can benefit both parties is vital to a sustainable ROI – Return On Investment. To calculate this number, you first need to understand the Cost Per Acquisition affiliate marketing formula (or CPA Formula, to be short).
And that CPA formula in digital marketing is precisely what we will present below.
Cost Per Acquisition Formula calculator in its basic form
The simplest and most basic formula to calculate spend for CPA Marketing is:
Cost Per Action Spent = Total cost of the ad campaign / Number of actions taken.
Yet this is just the standard Cost Per Action formula for the entire marketing campaign. It is only suitable when you only run CPA ads on a single platform. If you need to calculate the CPA cost for a specific marketing channel, a number break-down is required.
How to break down a CPA Formula for a variety of platforms? Please scroll down to read our Cost Per Acquisition example now!
Need a Cost Per Acquisition example? Here you go!
Let’s say your business runs a $4000-worth promotion for automotive sales and gains 120 conversions. Following the exact CPA Formula as explained above, we have:
$4000 / 120 = $33,3
In other words, your average Cost Per Acquisition spent is $33,3 per action – not bad!
However, when you break that number down, you see that Cost Per Acquisition Google ads only cost $1800 and bring back 80 customers, which equals a CPA rate of $22,5. Meanwhile, you spent $2200 on Facebook ads but only got 40 conversions (CPA Rate = $55).
What do those numbers speak of, you ask? Well, it proves that your Facebook promotion campaign doesn’t work well and needs to be adjusted for optimization.
That ability to reflect the effectiveness of marketing activities based on such actual results is the most critical feature of cost per action advertising. It’s the secret behind a sustainable ROI – believe us!
Then What’s the Ideal Cost for Cost Per Acquisition Marketing?
There’s no answer for this!
With the Cost Per Acquisition Formula we provided up there, no doubt that a low CPA can generate a high ROI for your business. However, how much you spend on Cost Per Action Advertising will depend a lot on your campaign goals as well as your industry.
Remember: an ideal CPA shouldn’t be too far off the industry average. And we’ve put together the metrics you need to see if your CPA marketing campaign is optimized.
No more mist, just facts check! Let’s go!
Average CPA Marketing Cost In Google Ads (All Industries Details)
What is the Cost Per Acquisition by industry? What is a good CPA rate for Google, you ask? If you are considering marketing through Google Ads, you should know that the average CPA cost on the search network is $56.11 across all industries (via Instapage). This number for the display network is even higher: up to $90.8 for 1 conversion.
Specifically, each industry will have an average CPA level in Google Ads as shown in the table below:
And make sure you’ve completely done researching about “target CPA formula” using Google Ads Planner. It’s a tactic that helps set bids for achieving as many conversions as possible.
Are the numbers above a bit high for you? Then, start considering doing CPA Affiliate Marketing on other platforms like Facebook. The average Cost Per Acquisition Facebook Ads (CPA on Facebook) is generally much lower than in Google Ads.
Fascinating right? So what is cost per action marketing ideal charge for Facebook Ads? Here, let’s explore below.
Average CPA Marketing Cost In Facebook Ads (All Industries Details)
The average CPA on Facebook Ads is $18.68 across all industries. Compared to Google, this is a holy number! However, that does not mean that every industry has such a low ideal CPA.
The average CPA disparity across industries on Facebook Ads is quite high. It’s stated super clearly in the following report:
Cost Per Acquisition Marketing Trend You Should Follow
There are 4 important trends that a CPA Affiliate Marketer should know:
- Firstly, the trend of CPA marketing is and will continue to snowball in Tier 1 countries (developed countries).
- Secondly, thanks to the optimization and profitability of CPA Marketing, many eCommerce companies have gradually converted from traditional marketing to affiliate/performance marketing.
- Thirdly, CPA Marketing tends to be overlapped with Influencer Marketing. Accordingly, e-commerce businesses will greatly benefit from partnering with reliable CPA Networks to find quality influencers as publishers.
- Finally, when doing CPA Marketing, focus on creating compelling copy, not headlines or pop-ups.
>>> Wanna dive deep into this field more? Click here: CPA Marketing
If you’re targeting actual business results, maintaining a solid return on investment, and expanding brand recognition simultaneously, try cost per action advertising! More than a trend in the marketing world, CPA Marketing is at the next level regarding ROI-positive solutions that digital marketers are searching for.
Hope this article by Dynu In Media has helped you discover what the Cost Per Acquisition Formula is and how to define an ideal cost for it. If you find this valuable, follow us for more!