Cost Per Acquisition (CPA) is the abbreviation for Cost Per Action. In order for your campaigns to be effective and to work hard to promote your products, it is very important to define the structure that you will campaign well in the first place. First you have to decide what are the goals you want to achieve.
For example, if your goal is to sell more products by promoting your brand; first of all, by defining your goal correctly; it will be to measure the money you spend and check whether you get the returns. Doing this measurement will prevent you from spending more money on advertising.
In this blog post, we will explain what Cost Per Acquisition (CPA) is and how you can calculate it. This will help you to understand exactly what you want to achieve with your advertising campaigns and to check whether the money you have invested is achieving the goals you want to achieve.
Cost Per Acquisition (CPA), as it is known and referred to in Google Ads and other paid media channels, stands for cost per sale or cost per conversion. This cost shows you how much conversion you get from your online ad sales.
For example, if you spent 500 TL on your digital campaigns and generated 5 sales or conversions, your CPA would be 100 TL.
How to Use Cost Per Acquisition (CPA) in Online Retailing?
Knowing your Cost Per Acquisition ratio is important because it tells you how much your online sales are costing you and whether the money you invest in advertising is a good investment. It allows you to adjust the costs of your campaigns accordingly.
How Can You Optimize Your Business Goals and CPA?
The simplest way to calculate CPA is;
Once you have determined your net profit from your product, you need to determine how much of this profit you are willing to spend on advertising.
Suppose we earn a net profit of 50 TL per product! It would be beneficial to first determine how much of your 50 TL profit you want to spend on advertising by deducting that amount.
If you’re willing to take a risk and reinvest your earnings into advertising to achieve another sale, then your target CPA would be 50 TL. This way, you won’t gain or lose anything on your investment and you’ll regain all the gains you’ve made to get more conversions, meaning more sales.
However, if you want to be a bit more cautious and retain 50% of your net profit while reinvesting only the other half, your target Cost Per Acquisition would be 25 TL. In this case, you are prepared to pay 25 TL for each conversion your digital advertising campaigns bring you.
It’s possible to have a different Cost Per Acquisition (CPA) for each type of product you have and even for each product you want to sell.
The level of granularity you want to achieve when creating your goals will depend on the depth and size of the campaigns you want to create. If you don’t want to run generic campaigns and advertise individual products, you can set a single target goal that takes into account the total cost and average net profit of your business. On the other hand, if you decide to advertise each product separately, you can calculate a more specific target Cost Per Acquisition (CPA) for each product using its individual costs and net profit.
Conclusion
As you can see, there are steps that need to be taken to get a Cost Per Acquisition that fits your business strategy, because you have costs to think about and interpret. You need to do all this work to ensure the focused target of your online advertising campaigns. Remember, there is no more effective and obvious way to earn back the money you invest in advertising and measure it effectively. Once you’ve established this, you can scale your ads to enable you to create the value your business needs.
