Cost Per Acquisition (CPA)
Cost Per Acquisition, or CPA, is a marketing KPI (Key Performance Indicator) for businesses to measure the average cost spend required to acquire a single customer.
What is Cost Per Acquisition?
CPA is a crucial metric for any business, whether your business is a new startup or a huge enterpris, as it serves as a measure of the effectiveness of your marketing activities.
In addition, looking at your Cost Per Acquisition is crucial in determining the sustainability of your business. For example, if your customers are (on average) spending more than the cost required to acquire them, you know that these activities are profitable.
Unsurprisingly, though, it’s rarely this simple. Let’s start by looking at how to calculate your Cost Per Acquisition.
Why is Cost Per Acquisition so important?
One of the reasons that Cost Per Acquisition is so important to a business, is that can be vital in establishing whether or not the business is profitable and sustainable (or, more likely, what needs to change to get a business there).
By combining CPA with other key ecommerce metrics, like a customer’s Lifetime Value (LTV), you can discern whether or not a customer ‘pays back’ the money it cost to acquire them, over the course of their ‘lifetime’ with your business. Ideally, the customer’s LTV will be more than your CPA, meaning that your business will achieve profitability.
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Cost Per Acquisition vs Cost Per Order
The difference between Cost Per Acquisition and Cost Per Order is a really important one.
It’s all well and good looking at your CPO, and assessing how much marketing spend your business is having to shell out for each transaction.
The point of analysing your CPA is not to see overall the effectiveness of your marketing efforts in getting users to order. Rather, it’s to look at how much it is costing your business to bring new customers in.
How we can help?
If you’d like help measuring your Cost Per Acquisition, or any of the other eCommerce KPIs mentioned here, Optiminder can help. Similarly, we can assist businesses in ascertaining the effectiveness of their various marketing activities, and trialling out new bidding strategies (such as the CPA Bidding mentioned above). Reach out today to find out how Optiminder can help you build a sustainable and profitable business.