Cost Per Action or CPA is an advertising model in which the advertiser pays for a specific action to be completed. For example, a company places an ad on a social media platform but pays the advertising platform not for the number of times the ad is displayed to users, but for the number of clicks it receives. The advantage of this model is that the advertiser only pays for results. When calculating CPA, the targeted action can be:
- visiting a website;
- filling out a form;
- making a phone call;
- subscribing or registering;
- watching a video.
To calculate the cost per action, you need to take the advertising budget and divide it by the number of conversions. For example, a business launched an advertising campaign to collect leads by filling out a form. The advertising budget was $300, and 50 users filled out the form. Then the CPA indicator will be $6. The acceptable size of CPA depends on the type of advertising, level of competition, and niche in which the advertiser operates. To accurately assess the indicator, it is best to consult with a marketer and also evaluate the CPA in conjunction with other metrics.
Sometimes CPA is mistakenly decoded as Customer Acquisition Cost, implying a purchase as the targeted action. However, in reality, CPA is only used in the context of advertising and does not imply purchases. Another indicator, Customer Acquisition Cost or CAC, is used to calculate the cost of acquiring a customer who made a purchase.