What is cost per action in advertising?
Cost per action (CPA) is an advertising model for digital marketing campaigns. Advertisers pay the advertising platforms using this model when a customer takes a specific action.
In other words, the advertiser only pays when a customer has filled out a form or clicked a link (or whatever other action has been selected).
Let’s compare cost per action to a couple of other related terms.
Cost per action vs. Cost per acquisition
It’s easy to confuse cost per action with cost per acquisition, but they’re different.
Cost per acquisition is a financial metric that tracks how much it costs a business to attract one paying customer.
Cost per action is how much an advertiser pays a platform for a customer who has performed a certain action. Only some of the potential customers who’ve completed the action you’re paying for will become customers.
Cost per action vs. Cost per click
Another related advertising concept is CPC (cost per click), which measures the cost of each customer clicking on your ad. However, the actions that can be used in a cost per action calculation include more than just clicks on an ad: things like views, form submissions, or sales.
Why is CPA important?
CPA advertising is useful for marketers because it allows them to target specific marketing objectives and then only pay when those objectives are accomplished. This makes it easier to track, control, and maximize the ROI (return on investment) for their ad spend.
Other advertising models don’t have a direct connection between advertising costs and outcomes, meaning that you often need a complicated revenue attribution model to figure out your ROI.
How is CPA calculated?
Advertising platforms like Google Ads calculate cost per action (CPA) by dividing the total cost of conversions by the total number of conversions.
For example, if your ad receives 2 conversions, one costing $2.00 and one costing $4.00, your average CPA for those conversions is $3.00.
How to make the most of your cost per action advertising?
Here are a couple of tips for ecommerce stores to maximize the results of your CPA advertising.
1. Improve your Ad Quality Score
If you’re advertising on Google Ads (a popular cost per action platform), you should pay close attention to your Ad Quality Score. The higher Google rates your ads, the lower the price you’ll pay, and the more relevant places your ads will show up.
2. Adjust your campaigns to your audience…
Make sure that you send the right message to the right audience.
Use your advertising platforms’ targeting features to ensure that you’re sending relevant content to the people seeing your ads.
If you’re using the right kind of messages, your potential customers are more likely to convert and move along your sales pipeline. If you’re paying for actions that don’t lead anywhere, on the other hand, you’re just burning money.
3. … and to your landing page
Finally, make sure that you echo the messaging from your ad on your landing page. You should provide a clear path for the visitors who’ve completed actions to move to the next stage of the sales pipeline.
Be sure to run different A/B tests on your landing page and don’t forget about conversion rate optimization.