Cost per acquisition (CPA)

economic-dictionary

The Cost per Acquisition (CPA) is the advertising cost that is paid for a sale made. Thus, you only pay for each converted action of a user, which in this case is already considered a customer for the company.

It is one of the favorites by advertisers since they only have to pay if they have really obtained a new user.

This model is the most used in ecommerce. The reason for this is that with the cost per acquisition it is possible to easily and quickly measure the number of transactions that are carried out thanks to online advertising.

A digital marketing campaign is aimed at a sale or conversion. Therefore, this method by acquisition is the ideal model to determine the return on investment (ROI) of any campaign.

In this case, it is easy to know not only what the campaign cost, but also the number of sales that have been achieved. A simple division will mark if there has been success or not, it is the clearest way to decide if the disbursement made has been effective and if this will make it possible to recover the amount that has been previously invested in the campaign.

Importance of the customer life cycle in the CPA

In this method, the customer life cycle is very important for an effective evaluation of the campaign.

Correct data will be obtained when considering the cost of acquiring a customer and the purchases that he will carry out throughout his life as a user of the company he follows, with which he has this commercial transaction.

The sale is considered the final conversion and coincides with the end of the conversion funnel. It is not possible to establish a subsequent agreement, because only the repeat purchase remains.

Disadvantages of Cost per Acquisition (CPA)

Here are some disadvantages of the CPA:

  1. For a branding campaign it is not the most appropriate model, CPM is preferable.
  2. It is recommended only for established companies.

Advantages of Cost per Acquisition (CPA)

Among the most prominent advantages are the following:

  • Ensures profitability (ROI or return on investment).
  • It is ideal for traffic or conversion campaigns.

Tags:  Commerce USA markets 

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