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Putting yourself on the Internet can be done in multiple different ways. Something crucial is to know all the advert payment methods. Don’t be discouraged by all the acronyms, after this article you will have a clear idea of what CPA is and other related concepts. You will have everything under control.
Let’s first review the most relevant online advertising payment methods:
➡CPA: Cost per acquisition. The advertiser pays per action. There are different types:
- Sales: CPS (Cost Per Sale). Payment based on each sale generated by an advert.
- Leads: CPL (Cost Per Lead). It normally refers to when users fill out a form.
➡ CPC: Cost Per Click. The advertiser pays each time a user clicks a banner, text or URL.
➡ CPM: Cost Per Mille or Cost per thousand impressions, that is, how many times your advert is displayed.
CPA or cost per acquisition is the total amount invested in online publicity with the objective of encouraging users to purchase a product or service. The advertiser only pays for a sale that occurred through the ad or affiliated link.
- CPA also charges advertisers for a specific action taken by potential customers, such as filling out a form, newsletter sign up, registration, etc.
- CPA can have a fixed or variable price, although it is normally set by a percentage over the total sales.
👉🏻 CPC, Cost per Click. Advertisers pay each time someone clicks on their ad. It is used to increase web traffic.
👉🏻 CPM, Cost per mille. Advertiser pay per thousand impressions, meaning how many times your ad is displayed, no matter whether it was clicked or not. It is commonly used for ads in search engines.
Cost per acquisition is the most beneficial online payment form if your objective is to increase sales or customers.
If you compare CPA with other payment methods, like CPC (cost per click) or CPM (cost per thousand impressions), we can say that cost per acquisition is more advantageous if your goal is to increase the volume of sales or customers as you will only pay for any successful sale or lead.
How to calculate CPA
To calculate the CPA of a marketing campaign, we must divide the total cost of running that campaign by the number of conversions.
For instance, if we spend $3,000 in an ad campaign and we obtain 550 successful sales, our CPA would be:
CPA = 3,000 / 550 = $5.45
The cost per sale is $5.45
When investing in an advertising program based on CPA is not profitable
CPA doesn’t perform well in branding campaigns. The objective of this type of campaigns is to increase the number of people who see your content and impact them. For this model, CPM would adapt better.
Another alternative where CPA is not the best choice is when your objective is to drive traffic to a specific website. In this case, CPC would be the best option.
We hope that you have learned what CPA is, how it works and how it is calculated. Now is the time to put it into practice with your marketing strategies.
Do you have any questions? Drop us a line in the comment section