Cost per acquisition (CPA)

The cost per acquisition is a crucial KPI to track. Here's all the information you need about this KPI, what it is, why it's important, how to calculate it, and way more!

TRACK YOUR COST PER ACQUISITION!

What is cost per acquisition (CPA)?

Cost Per Acquisition, or "CPA," is a marketing metric that measures the total cost to acquire one paying customer. It must include the cost of marketing campaigns or other spending to get a new customer. This metric is usually calculated alongside the average customer lifetime value (LTV), return on investment, or cost per action. These three combined will let you know how well you're doing with your marketing budget. This can also help you with various business decision-making.

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How do you calculate cost per acquisition?

The CPA calculation is calculated by dividing your total costs (marketing costs) spent by the number of new customers in the same time period. For example, if for one month all your marketing efforts cost about $500 and your number of potential customers is 100, your customer acquisition cost would be 5$.

Cost per acquisition formula

Total marketing costs/number of new customers = Cost per acquisition

What is a good cost per acquisition?

A good cost per acquisition ratio is 3:1, so ideally about 3 times lower than the customer lifetime value (CLV). If your ratio is 1:1 or close to it, your acquisition cost is more than it should be. But if it’s a higher CPA than the benchmark, such as 4:1 or 5:1, you should be spending more as you might be missing some key opportunities.

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What is a bad cost per acquisition?

If a good CAC is at least 3 times your CLV, an average CPA of fewer than 2 times your CLV usually isn't too good. But remember the golden rule: more paying customers, less marketing spend. To get a lower CPA, optimize your ad spend, get a higher CPC and maximize the number of conversions.

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Cost per acquisition KPI examples & templates

Reports give you a good view of all your online marketing strategy metrics and overall online performance. Cost per acquisition can be added to a few KPI templates :

See this KPI in action here!

See this KPI in action here!

Executive report template

This template is filled with business metrics your C-suite will want to see. Show them your revenue, new customers, online advertising results, lead generation, and more. You can track this data alongside other financial metrics that will help you make better decisions like getting higher results with lower costs.

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PPC report template

Get the best out of your ad campaign. From social media to AdWords and Google Ads, measure your ad results with this awesome digital marketing report which helps you track important metrics and know which optimizations are worth it.

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Ecommerce report template

A report with all the most important metrics for your eCommerce business site. Measure your conversion rate, the click-through rate (CTR), the average cost of acquisition, the total number of sales, cost per click, average order value (AOV), and revenue, all from your marketing channels.

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Cost per acquisition best practices

In order to improve your cost per acquisition, here are some of the best tips you should keep in mind.

Diversify your acquisition strategy

Sometimes, taking the time to analyze various data in order to make better decisions is absolutely worth it. Where do you put most of your marketing efforts? Which channels does your marketing team use? Social media, content marketing, affiliate marketing, SEO, landing page, a/b testing? Trace transactional customers back to their attribution source to have a good idea of which channels works well.

Track it alongside other metrics

Tracking CPA is great, but it's also important to track it alongside other metrics like marketing ROI (ROMI), Lifetime value of a customer, conversion rate, etc. This will help you get a more accurate picture of your target audience, marketing efforts, and the revenue they're generating. Use a tool like Dashthis to create a monthly report to track those important metrics.

Invest in customer retention

Having a customer come back costs a lot less than acquiring new customers. Make sure your sales team is successful at onboarding new clients, and those customer relationships are just as good throughout the sale process. The user experience is just as important during the sale process as after the client is officially unboarded. This could be done by implementing a loyalty program, giving out promotional codes, retargeting, and maximizing the quality of customer service.

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Cost Per Acquisition Synonyms

Although cost per acquisition is widely used, there are multiple synonyms that can be used. Here are a few :

Cost per conversion, Cost per action (CPA), Cost per customer, Cost per client, Cost per new client, Cost per new customer, Cost of customer acquisition (COCA)