CPA calculator: what it is, how to use it and get the most out of your advertising campaign
Many may wonder what CPA we are going to talk about? Because this abbreviation can be coded both as "cost per action" and as "cost per acquisition". Although the terms are often used synonymously, the first refers to the charging model, while the second, which we will discuss in more detail today, shows the price we pay for attracting a new customer. Learn more about how cost per acquisition can help you manage your advertising budget and why a CPA calculator is great for this purpose.
How is CPA calculated?
As you read the sources, you will agree that CPA is often referred to as CAC or customer acquisition cost. It should be emphasized that CAC refers specifically to the customer who made a purchase, while CPA is a slightly more elegant indicator. It's focused on conversions, which can include a signup, a newsletter subscription, a call, or any other action you choose. For the sake of convenience, this indicator could be simply called the conversion fee.
Now that we are familiar with CPA, we can easily derive its formula:
CPA = Total ad cost/number of conversions
Example: if you invested 1000 euros in your Facebook advertising campaign and got 8 customers, then your CPA is equal to 125 euros. If this amount exceeds the profit received and your other financial expectations, unfortunately… but the campaign is unprofitable. But don't worry, there are ways to avoid mistakes or get your numbers back on track if you keep an eye on your data.
Do I need a CPA calculator?
Yes, if you value your time! Although, at first glance, it seems that calculating CPA is very simple (and we really can't argue with that), the CPA calculator will make your life easier in several aspects:
- It will help to avoid confusion and inaccuracies (which means losses) in manual calculations
- It will help when comparing several campaigns
- CPA calculators are free and easily found online
- The CPA calculator has already saved your competitors tons of time
- Or turn to AdSEO specialists and calculate only ROI
The world of digital marketing is full of confusing acronyms, formulas and tables. Entrust advertising matters to professionals and do not worry about additional calculations or possible mistakes that can be avoided by the eyes of an experienced expert.
What makes a good CPA?
Perhaps you have heard this not for the first time, but there is no unequivocal answer to this question. It all depends on your industry, the price of the goods/services you sell, the type of advertising and other variables. Since this indicator is quite individual, your own data will tell you the most.
It is very important to check your CPA periodically and evaluate the benefits of your marketing campaign for your business. Of course, a low CPA is indeed pleasing, but it is only valuable if it brings you long-term value. CLV or "customer lifetime value" has a significant impact on the cost per conversion. Imagine you spent 10 euros to get a customer to shop with you for 20 euros. In one case, he may never return, and in the other, he may shop for another 200 euros in the future. In both cases, your CPA is 10 euros, but their value in the long term is radically different.
How to improve CPA?
If you're not satisfied with the results of your ad campaign, in this case specifically with the CPA calculator data, start with the basic steps.
- Review your keywords. It's worth making it a habit and practicing regularly, regardless of the effectiveness of your advertising campaign, because it can always be improved. Eliminate irrelevant keywords, look for specific variants relevant to the target audience, such as long keywords.
- Make sure your bets are not too high. You may be overpaying without knowing it.
- Choose the right time. Forget 24/7 ads. Find out what is the most productive time to show your ad.
- Narrow your ad settings. Think about whether you need such a wide location, as well as whether it is worth advertising on mobile phones.
- Focus on remarketing.
- The quality and relevance of your advertising is certainly not in the last place.
- Test and test again.
Do not forget that CPA is directly related to the amount of conversions, so if this indicator is not satisfactory, it is worth looking into how to raise your CR (conversion rate). Clicks are good, but if they don't lead the user down the sales path, such a strategy will not yield the long-awaited return on investment. As you analyze your ad campaign data, you'll notice that all the numbers are interacting, and your job is to track down which part of the chain is stuck and recruit those resources to your goals.