What is cost per acquisition?
Cost per Acquisition (CPA) stands for a specific pricing model in digital marketing. By acquisition we mean a predefined action. The costs incurred per acquisition via various channels are called cost per acquisition. Simplified and translated analogously, one can also speak of costs per new customer acquired.
- Model for pricing in online advertising
- The action expected by the user can be defined differently
- Are the costs per new customer won
The importance of cost per acquisition
The term cost per acquisition (CPO = cost per order and CPA = cost per action are also used synonymously here) refers to costs per predefined transaction. It is therefore a special model for pricing advertising on the Internet. Advertisers pay the advertising medium a certain amount of money for a defined transaction, which comes about via the page of the respective advertising medium. A further distinction can be made between different CPA models. We speak of pay per lead when a non-monetary transaction (e.g. an e-book download to an e-mail address) is achieved via the campaign. Pay per sale means that a purchase has been concluded. In general, the CPA is therefore used for a wide range of activities. Whenever the User performs an action in the context of an advertisement, the advertiser pays an amount to the publisher or advertising partner for all these actions at the Cost per Acquisition. The action expected and desired by the user can be defined by the advertiser in different ways, typical examples are orders, registrations, downloads or other clearly defined actions. A great advantage of Cost per Acquisition is that payment is only required in case of new customer acquisition or successful advertising treatment.
Cost per acquisition – a pricing model in online marketing
In some sectors (e.g. finance, insurance, cars, etc.) a newly acquired customer is worth considerably more than in others (e.g. stationery or other comparatively cheap products). For this reason, the cost per acquisition method will be used primarily in the former in particular. The advertiser can set a maximum amount (maximum CPA bid), which he is willing to pay for each new customer. Conversion tracking can be installed free of charge via Google Adwords, which activates an optimization tool for the campaign. There are two bid types to choose from, target CPA and maximum CPA. With the target CPA, the average value is set, whereby an advertiser pays per conversion. With maximum CPA, advertisers set the maximum amount they are willing to pay for each conversion. When using the conversion optimization tools, most of the bids are below the maximum amount. In principle, a commission is paid to the advertising partner for the successful completion of the transaction, which is called CPA in short. This term or the associated process originates in particular from the affiliate marketing sector. This form of advertising is also quite powerful because, as already mentioned, payment only has to be made in cases where the user also “orders” something. A professional SEO agency should always try to lower your CPA value so that the costs of the optimization measures pay off for you quite quickly.