Cost Per Acquisition (CPA)

What is "cost per acquisition?" Commonly referred to as "CPA," "PPA" (Price Per Acquisition) and "Cost Per Action;" also similar to CPL/PPL (Cost Per Lead/Pay Per Lead), cost per acquisition is a direct marketing measurement model based on a high return on investment (ROI). How do we translate this? The CPA finds its measure on specific, required conversions (e.g., registration, sales, file download, etc.) that are weighed against goal-oriented advertising costs.

In laymen terms, the cost per acquisition can be calculated by using the total cost of an advertising campaign, and divide it by actual amount of positive responses. Let's say that you've spent $1,000 to advertise a particular product or service; out of this marketing campaign, 25 people responded. Now, based on these figures, one could determine that your cost per acquisition (for this hypothetical campaign) would be $40.

Why are cost per acquisition figures important? The CPA is a vital tool in accessing the actual value of a marketing campaign. One would not want to spend thousands upon thousands of dollars for a low yield, so cost per acquisition can inform us how much we are spending in relation to actual profits. In general, cost per acquisition is performance based, and commonly pays a commission on products and/or services that are actually sold.

The CPA can provide advertisers with an effective marketing model that can assist them further by lending valuable data on how leads convert to actual sales and length of time involved in the closing of the sale. As an assessment tool, the CPA can be extremely effective in providing necessary data for future marketing campaigns.

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