Term: "Cost Per Acquisition (CPA)"
Definition
Cost Per Acquisition (CPA), also known as Cost Per Action, is a key performance indicator in digital marketing that measures the aggregate cost to acquire one paying customer on a campaign or channel level. It is a crucial metric for evaluating the effectiveness and efficiency of advertising and marketing efforts. CPA is calculated by dividing the total cost of a campaign by the number of acquisitions (actions) it generated. These actions could be sales, leads, or any other predefined conversion goal, depending on the business objectives.
CPA provides valuable insights into how much a business is spending to convert a prospect into a customer through a specific marketing channel or campaign. It helps businesses to allocate their marketing budget more effectively, identifying which channels and strategies provide the best return on investment in terms of customer acquisition. Lowering the CPA, while maintaining or improving conversion quality, is a common goal in digital marketing strategies, as it directly impacts a company's profitability and growth potential.
Marketers use CPA to compare the cost-effectiveness of different marketing channels and campaigns, guiding strategic decisions about where to invest marketing resources for maximum impact. It's particularly useful in paid advertising campaigns, such as pay-per-click (PPC) advertising, but can also apply to other marketing efforts aimed at driving conversions.