How does Cost Per Acquisition CPA Work

How does Cost Per Acquisition CPA Work

The truth of the matter is great ad people know their numbers, and they are out for results that are measurable. Marketers know they will get nowhere if they do not track their numbers. The best part is, great marketers are on top of the world because they know the metric that is the most important of all: the cost per acquisition (CPA). They are also aware that other metrics are important, but this supersedes them all. Companies that embrace these factors know that they do not have to waste their time on things that do not hold any water.

What is cost per acquisition (CPA)?

Also known as cost per action, CPA can simply be defined as the metric that counts the amount a company pays to earn conversions. Overall, the CPA is usually more than the cost per click (CPC), since not all who click on the ad will end up to the desired actions defined by the business. Cost per action considers the number of ad clicks it takes before a visitor converts. Plainly put, if the conversion rate improves, the cost per action gets lower, and so does the cost per click.

How to track cost per action?

Tracking CPA is more simple for an e-Commerce company than the brick-and-mortar companies. e-Commerce companies simply have to track their sales by following their customer links as a source of their sales. Since sales are from diverse sources for brick-and-mortar businesses, they must get aggressive with their tracking codes and customer links. They must deal with the loopholes in sales and ensure their promotion codes are unique among other things. They must go the extra mile and ask their customers where they got the information regarding the company and the product.

What is cost per action bidding?

As a method of advertisement that allows a company to gain more grip on controlling their budget, it requires the business to just pay for each conversion. The company has the power to define the metric when setting up every campaign. It is different from cost per click bidding in that, in CPC bidding, the company pays for every click on an advertisement.

One major factor that hugely affects CPA is the Quality Score. The Quality Score is a Google metric that works based on keywords, ads, and landing pages. The rule is; the better the Quality Score, the lower the costs become. For every point scored beyond the average Quality Score of five, the CPA drops by 16 percent. Keeping the Quality Score reduces the budget for CPA, meaning the company can get more space and exposure for advertising.