What is Cost Per Acquisition CPA
CPA stands for cost per acquisition or cost per action. How much as a business owner want to pay when a user online takes an action or completes an action leading to a sale.
It is one of the three most common ad pricing models used along with CPM and CPC. For individual sites, CPA ads can be a risky proposition, but when run through a major ad platform they can be very profitable for both site and the advertiser.
Cost Per Action or CPA campaigns are the best way to directly link campaign performance with business success, with CPA, you don’t pay based on impressions or even clicks. You pay for how many people act. And that’s a huge advantage when it comes to tracking ROI for your online business.
In this blog, I’m going to show you the various techniques that make up CPA marketing, and how ad platforms like Google, Facebook, and Pinterest, all offer CPA marketing tools to let you take control of your budgets and make sure your dollars are delivering results
Tracking user actions is a key tool in the modern e-commerce ecosystem. It has been responsible for huge growth in campaign performance.
In the days before the internet, the best an ad could hope for was to make an impression that the customer would act on later, and advertisers would pay upfront, based on the estimated number of impressions a show with X ratings, or magazine with Y distribution, could deliver.
Companies would also hire spokespeople to represent their brand in the hope that a celebrity’s association with their product would lead to increased sales, but much like the ads themselves, there was no guarantee that the spokesperson would resonate until after the check was cashed.
All that has changed due to CPA marketing, thanks to pixel-tracking technology, advertisers can see when a user has clicked an ad or a promotion. They can also see if the click resulted in a conversion, like signing up for a newsletter, watching a video, or downloading an offer, or making a sale.
what's the best way to make CPA work for you
Let’s look at some of the most popular methods. Affiliate marketing is an extremely popular strategy because it combines the performance tracking of CPA marketing with the influence of a trusted spokesperson. With affiliate marketing, the advertiser partners with a publisher who promotes the advertiser’s product or service, usually as part of the publisher’s content.
A good example might be a popular travel blogger who writes an article about a vacation destination and includes a special discount on a hotel.
The hotel then pays the blogger for every booking that comes either directly from the reader clicking the link, or any booking that occurs within 30 days of when the customer visited the blogger’s site.
There are giant, enormous, maybe even ginormous, affiliate networks dedicated to pairing advertisers with publishers
Google Ads is a leader in the CPA game. Advertisers purchase ads that run along with relevant search results and pay Google every time a results page ad leads to a desired action. These ads are auctioned to advertisers via a bidding system that considers not just the highest bidder, but also the quality of the offer. This is called the Ad Ranking and it’s determined by multiplying the Dollar Bid x The Quality Score.
The Quality Score is determined through Google’s analysis of your site’s relevance to keywords, click-through rate and overall user experience, and how well it matches with the ad that you’re running. You can spend less on ads and get better performance, if your landing page is optimized to give users an ideal experience after they click on the ad.
In addition to CPA, you can also optimize your ads for conversion value. If you have higher value actions, like a more expensive product, Google will optimize your ad to deliver the most.
All the major social media platforms offer their own version of CPA ads that are easy for anyone to use. CPA ads on Facebook, LinkedIn, Pinterest, and so on, are some of the most used and commonly misused by marketers around the world.
Cost Measuring KPI's
KPI's used to measure Costs Per Campaign
When CPM is best option for Advertisers
- Raise Brand Awareness
- Discover Best Audiences
- Get cheaper traffic than CPC, CPL or CPA
IS CPA better than CPC?
You can not directly start with the CPA as it requires historical data. All campaigns start with CPC and once over 30-50 conversions are received, within a month, then you can migrate to CPA. It totally depends on your campaign goals. In my opinion CPA bidding strategy is the better option. CPA uses Machine learning, AI and Historical data to determine when to show ads and how to increase campaign ROI.
If you have a limited budget or are new to Google Ads, CPC might be the optimal choice. CPC can help you learn about keywords that bring sales or conversions and keywords that need to be avoided. One of the advantages of CPC provides, it gives total control to advertisers the amount wants to pay for an ad click.
How is CPA Calculated?
CPA = Total budget spent / Number of conversions