If you run several advertisements at once, you may have several CPAs you can use to compare to one another. A single CPA can give you a general idea of how much it costs to get existing and new customers to take action on your website when encompassing all of your marketing efforts.
For example, let's say you've added all your paid marketing mediums up and have an average CPA of $125.
When you break your spending per action down by campaign, you can get a more granular view of which advertisements have performed best and increase the number of new customers acquired for lower operating expenses.
For example, let's say you ran Facebook Ads, Google Search Ads, and TikTok Ads, and these are your results:
- Facebook Ads: CPA=$25
- Search Ads: CPA = $50
- TikTok Ads: CPA = $90
What do the above numbers tell you?
Ultimately, Facebook ads gave you the cheapest cost per action, which means you should invest more money into Facebook ads than the other two options because it gives you as many conversions at more than half the CPA of the other two other platforms combined.
The lower your spending, the higher your profit, so you should always try to make your total cost per action lower to ensure the success of your ads.
Unfortunately, CPA is a granular marketing metric, which means it shouldn't be the only thing you track to determine overall campaign success. Lowering your spending means higher profits, but it doesn't necessarily mean you're increasing your acquisitions on one platform over another.
For example, your campaign from earlier might have given your Facebook Ads a cost per acquisition of $25, but that might not help grow your business if only one became a paying customer.
If you want to get a more accurate picture of your campaign performance, you'll need to invest time and energy into data tracking to measure other marketing metrics like customer lifetime value impressions, conversions, and conversion rates.
What is a good (or bad) cost per acquisition?
Whether you have a good or bad total CPA depends on more specific industry benchmarks and platforms or websites you advertise on.
For example, Facebook advertisers can oftentimes yield a lower cost per acquisition than search ads for content marketing, depending on how your ads are set up. The more experienced the person managing the advertisements, the lower they'll be able to get your CPA.
For example, a good CPA on Facebook ads can range from $5 to $60 or more, depending on your niche and how well your online advertising performs. In general, you want your cost per acquisition to be as low as possible.
However, the good news is that once you have a benchmark from your first ad, you can find ways to improve your cost per acquisition to increase the number of new customers acquired.
How to improve your CPA
Since your goal should be to constantly improve your cost per acquisition, ultimately reducing how much it costs to obtain a customer, you should never turn your back on your ads.
The lower your CPA, the more customers you can earn without increasing your budget. Therefore, it's important to experiment and find out what works best for you. Here are a few tips to help you reduce your CPA acquisition:
A/B test everything
A/B testing every aspect of your ads can help you find the most effective elements. For example, you can test elements of your landing page, such as the headline and description, to make it easier to acquire customers to understand your offer. You can also optimize your form, as shorter forms tend to have a higher conversion rate.
Optimizing your landing page can help you make a better first impression, increasing the number of people who convert, a very important marketing metric.
Retargeting involves showing your ads on relevant content to individuals who have already visited your website without taking action.
For example, if your goal is to get people to fill out a form to enter your sales funnel, you can target individuals who visited your website and didn't fill out the form. Retargeting strategies are effective because the audience you're targeting is already familiar with your company and offer, making them more likely to convert.