Cost Per Action (CPA)

Cost per action, also sometimes known as CPA and cost per acquisition, is primarily a Google Analytics metric. Specifically, it’s used to measure how much a marketer pays to secure a conversion.

On the whole, CPAs are usually higher than your cost-per-click. This stands to reason because not everyone who clicks on your ad follows through to complete your desired action.

Your specified “action” doesn’t have to be a sale (although that’s usually the goal). Instead, you can set an action to gain new email subscribers, for visitors to contact you, or download your free giveaway, etc. Whatever you decide, these are all actions you can measure by keeping an eye on your CPA.

How is a CPA rate calculated?

The answer is simple.

Your CPA is calculated by the average number of clicks (on a PPC ad) to get a conversion. This means dividing the total cost of your conversions by the number of conversions you actually achieve.

It’s worth bearing in mind that your “quality score” also affects your CPA. For those who don’t know, a quality score is another one of Google’s ad metrics. This helps to determine the quality of your keywords, ads, and landing pages. As you may have already guessed, the higher the quality score, the lower your CPA costs. On average, for every point above five you gain on your quality score, your CPA cost reduces by around 16%.

This stat speaks for itself—optimizing for quality score and CPA are pretty much one and the same.

What is the Average CPA?

This massively varies depending on which business model you’re using and of course, the industry you’re working in. But one study found that across all sectors, the average person reports a $59.18 CPA (on the search network) and a slightly higher SPA ($60.76) on the display network.

What’s Cost Per Action Bidding?

CPA bidding is a type of paid-for Google advertising. It empowers marketers to keep a tight reign on their advertising spend. So, instead of paying Google every time someone clicks on your ad (also known as CPC bidding), you only pay when you achieve a conversion.

This is a metric you can set yourself and something that can vary from campaign to campaign. So, think about what you want to achieve—is it sales, leads, engagement, etc.?—and go from there.

The best thing about CPA bidding is that you don’t waste your precious pennies trialing keywords that might not produce healthy ROI. It stands to reason that if your ad pops up in a set of search engine results and it doesn’t completely match the searcher’s intent, you’re less likely to secure a conversion from that click. As such, CPA bidding (typically) offers more bang for your buck—make, sense?

What is Google’s Target CPA?

This is Google’s smart bidding strategy. This helps marketers manage their bids, so they achieve as many conversions as possible either matching (or below) your set CPA.

If you have a history of launching ad campaigns, Google Ads will eventually recommend a target CPA to you. This is calculated on your account’s previous conversions. You can choose whether you use Google’s recommended target CPA or set your own. So don’t worry—you won’t lose control of your budget!

It’s worth noting that some of your conversions will cost slightly more or less than your target CPA. But, on the whole, Google Ads tries to keep your costs equal to your set CPA. Unfortunately, these fluctuations in CPA occur due to things outside of Google’s control. For instance, modifications to your website, ad campaigns, or a boost in ad auction competition.

Tip: Avoid setting your CPA target too low. Yes, you don’t want to go over budget, but you may also forgo conversions as a result of scrimping.

How does Google calculate your Target CPA?

In short, they use machine learning to optimize bids automatically. This tech delves into the last few weeks of your campaign history and takes an in-depth look at all the factors present at auction-time. This allows Google to find the best possible bid for your ad each time it’s eligible to appear.

By “factors” we mean things like your prospect’s:

• Device
• Browser
• Location
• Time of day
• Remarketing list

Just to list a few examples.

You can choose to use Target CPA either as part of one campaign or as several.

What’s an Average Target CPA?

This differs slightly from a regular CPA. Your average target CPA is the cost-weighted average CPA you’ve optimized your bid strategy for. This takes into consideration your average:

• Device bid adjustments
• Ad group target CPAs
• Modifications made to your target CPA over time

As a result of these variables, your average target CPA sometimes varies slightly from the target CPA you’ve set.

What should you use this metric for?

Your average target CPA can be used to help measure the effectiveness of your set target CPA for your current bid strategy. You can test its effectiveness over an array of periods. By changing your date range, you’ll see what your CPA actually results in over different periods.

What about Facebook (FB)?

It’s not just Google that offers CPA bidding. Facebook does too, but they call it “cost per action.”

When you launch paid-for Facebook ads, not only do you get access to Facebook’s advanced targeting, but you only have to pay when your ads actually produce your desired action.

To use CPA bidding on Facebook, head over to Facebook’s Business Manager. Set your campaign objective, then choose an ad set optimization that permits you to pay per CPA. It really is as simple as that!