Your target Cost per Acquisition is determined by the budget you can allocate to acquire a new client. How to calculate your target Cost per Acquisition Therefore, you’ll want to make sure that CLV> CPA for each channel. The reason you want to know the CLV for each customer is that you want to make sure you’re not paying more to get a customer than what they are worth to your business, but also to determine which channels are the most effective for your business. CLV (Customer Lifetime Value) represents the total amount of money that a particular customer is likely to spend over his or her lifetime relationship on your website. If you responded to $25, then you are correct!īut how do you know whether that’s a good or bad CPA?ĬPA and CLV are closely connected. So what is the CPA for this campaign? $500 cost of campaign / 20 conversions = $25 CPA. After the campaign ended, you calculated that it has brought you 25 sales. Let’s say you run a Facebook campaign for your online shop that sells flower bouquets and your total budget for that campaign was $500.
The mathematical formula for calculating the CPA is:ĬPA = the total cost of a campaign/number of conversions The reason CPA bidding is preferred by marketers is that you are paying for a direct result, and you can compare performance across channels (when you are running campaigns on both Facebook and Google for example). Sometimes, a conversion is synonymous with a sale, but it can also be a click, a download, or an install.Īd networks will give you the option of choosing between CPA, CPC (Cost per Click), and CPM (Cost per 1000 impressions) bidding. How Omniconvert can help you improve your Cost per AcquisitionĬost per Acquisition, also known as Cost per Action or CPA, is a marketing metric that measures the cumulative costs of a customer taking an action that leads to a conversion.How to calculate the Cost per Acquisition.Knowing what the Cost per Acquisition is and how to calculate it correctly is essential for every business, no matter the industry. Unlike the conversion rate, which is an indicator of success, Cost per Acquisition is a financial metric used to measure the revenue impact of a marketing campaign. Why? Because your CPA will give you an estimate of how much your new customers are costing you and help you determine whether your strategy needs to be revised. Cost per Acquisition (CPA) is one of the most important metrics that marketers should track and measure.
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