The term is somewhat self-explanatory. The CPA is how much you pay for someone to take a specific action. While the term ‘action’ is vague, in marketing parlance the term doesn’t mean just any action, but both ‘action’ and ‘acquisition’ refer to a sale. This pricing model is also known as Cost per Acquisition or Pay per Acquisition (PPA). Typically you get to define what the said action is, or what constitutes an acquisition. To get this number you simply divide the cost of the ads by the number of actions or acquisitions that are made. So, if you get 10 acquisitions from spending $150, then the CPA is $15. Not bad, unless you are selling a $5 product.
At the end of the day, knowing this number has a lot of advantages. If you’re CPA is significantly less than your LTV, then your business is bound to succeed. However, while your online campaign can tell spit out a number for your CPA, it doesn’t factor in the cost of brand awareness, online and offline reviews, and other touch points that are factors in someone making a purchase. So, while CPA is one of the best online metrics, it’s not the end all be all of measurement.
In the world of Facebook, the CPA bidding model isn’t solely tied to sales. The ‘action’ on Facebook is open to interpretation.
User beware: this term can get thrown around and used in different ways around the internet, but in general it refers to the cost per sale.
While a conversion can be a sale, it isn’t necessarily always a sale so ‘cost per conversion’ does not always equate to CPA.