What is cost per action/cost per acquisition (CPA)?

Cost per action (also called cost per acquisition) is a pricing model where advertisers pay when a user completes a specific action (e.g. a purchase). In other words, it tracks the cost that you pay per conversion. With Catalog Ads, lowering your CPA often comes from tighter product targeting and optimised feeds.

How do you calculate CPA?

To work out your CPA, you divide your total advertising cost for the campaign by your total number of conversions. 

For example, if you spent $1,000 on ads that generated 20 purchases, your CPA is $50.   

Why is CPA important in e-commerce?

Your CPA matters because it helps to measure your return on investment ( ROI). Put simply, it tells you how much you’re spending to get a customer. Armed with this information, you can optimise your budget accordingly.  

Which factors can impact your CPA?

Landing page experience

If your ads redirect users to a landing page that embraces conversion-focused design and loads quickly, you increase the likelihood that shoppers will convert which will lower your CPA. In addition to design, also look at the page’s messaging. It should align with what the ad promised and have clear calls to action (CTAs). 

Offer

It doesn’t matter how great your ad is, without an attractive offer or product, your conversion rate will remain low. Elements like transparent pricing, discounts, social proof, trust signals, and emotive language that drives urgency all help to make your offer more attractive. 

Ad creative 

Platforms like Google and Meta reward ads that match user intent with better placement and lower costs. In addition to keeping your ads relevant, also keep them fresh to avoid ad fatigue which can also increase your CPA. 

Audience targeting

If your audience is too broad, you run the risk of generating low-quality leads that are unlikely to convert. On the other hand, hyper-narrow targeting can increase the competition and cost. You’ll need to use audience segmentation to find the sweet spot between targeting too broadly or narrowly. 

Challenges in measuring CPA

Defining which action to measure

Sometimes brands track the wrong action (or one that’s too broad). Before you measure CPA, ensure that you know which type of action you’ll track. Let your campaign goals guide you in deciding whether it should be a completed purchase, email sign-up, or lead form submission. 

Hidden costs

Many e-commerce businesses rely solely on ad spend when they work out the CPA. However, ignoring hidden costs like agency fees or creative production costs will mean that you underestimate your true CPA. 

Tracking limitations

Platform and data privacy updates have made it more difficult to track user actions. This can make your tracking less accurate which means your data on which you base your CPA will be less reliable. 

Cross-channel fragmentation

Your audience typically interacts with your brand across multiple platforms like Google, Facebook, Instagram, and TikTok. If you measure CPA in isolation per channel, you’ll work with only part of the picture. For example, it might appear at first glance that Google has a high CPA when, in fact, it plays an essential role in your audience’s multi-channel conversion path.