What is CPA?
Cost-per-acquisition, or CPA, is a metric that evaluates your company’s expense to gain a conversion. Your CPA will typically be higher than your cost-per-click or CPC, because not every person who clicks on your ad will do the required action, whether that is completing a purchase or filling out a form to become a lead..
Cost-peracquisition (CPA) considers how many ad clicks are required before a conversion occurs; hence, increasing your conversion rate will reduce your CPA. Your CPA will contribute to your overall Google ad costs and CPC.
So, what factors influence your CPA? Like other aspects of PPC, your CPA is directly affected by your Quality Score (QS), which is determined by Google and is based on the quality of your keywords, ads, and landing pages. In general, the greater your Quality Score, the lower your costs; for each point, your score exceeds the average Quality Score of 5, and your CPA will drop by approximately 16%.
Maintaining a high Quality-Score and a low CPA can significantly impact your PPC budget over time, allowing you to acquire more exposure in the online advertising arena and optimize the number of conversions that result from your ad expenditure.
How to Calculate CPA?
CPA = the total cost of a campaign/number of conversions.
How does Quality Score affect CPA?
Quality Score in Google Ads is commonly known to affect your cost per click, but not everyone recognizes that Quality Score is equally essential in calculating your CPA.
There is a significant association between average CPA and impression-weighted Quality Score: the greater the Quality Score, the lower the cost-per-acquisition. In other words, optimizing for Quality Score and optimizing for CPA are pretty much the same.
What is CPA Bidding?
CPA bidding is a paid advertising approach that allows you to control your advertising budget closely. Unlike CPC bidding, which requires you to pay Google every time someone clicks on one of your ads, CPA bidding only requires you to pay for each conversion, which you define when you set up each campaign.
This action could be a sale, a lead, a download, or any other conversion you describe. CPA advertising can aid you in avoiding spending money on search queries that are not immediately delivering business.
If one of your ads appears in a SERP but does not match the searcher’s purpose, you will only be charged if the searcher engages with the ad and eventually converts.
Why is Acquisition Cost important?
CPA helps an eCommerce brand go deep in their evaluation of how expensive it is to acquire a new customer or how much you can afford to continue driving growth for your brand from your marketing budget.
You should expect your CPAs to rise as your business expands and consumers become more expensive to acquire. However, if your CPAs are decreasing and you can afford to spend more money, this is an excellent chance to go in and expand your brand more quickly.
It’s also vital to note that CPA is a marketing channel efficiency indicator. Higher CPAs may suggest that your performance in a marketing channel is declining, while lower CPAs may indicate that your performance is improving.
Now that we have covered everything to get started let’s dive into how you can improve your CPA performance.
How to Optimize your CPA cost
Because your quality score is the most influential factor in achieving a top ad ranking and generating more conversions, the best strategy to maximize your CPA costs is to develop captivating ad and landing page material.
Now let’s check out one by one how you can optimize your CPA cost with minimal effort. In Google Ads, various strategies exist to lower CPA, including:
Analyzing the Account Structure
Considering both the audience/keyword subject and the prioritization while designing your campaign structure plays a crucial role in bringing down the CPA.
Having leveled campaigns (e.g., high/medium/low priority) for your themed segments (e.g., brand, non-brand) allows you to allocate money precisely where you want it.
Campaign and Bid Coordination
It is essential to align bids with your campaign budget to maximize efficiency. If your campaign is budget-constrained, consider whether you want to reduce (or not) your ad group and keyword bids.
In order to obtain more clicks and conversions for the same budget, it often makes sense to lower your bids, even for ad groups and keywords that are performing well.
Keyword Optimizations
Keywords are the heart of a pay-per-click campaign; therefore, they play a vital role in optimizing & lowering your CPAs. Reviewing what phrases are triggering your ads should be part of your routine.
The purpose of keyword optimization is to ensure that your accounts’ broad phrases and exact match terms are both relevant and triggering from the appropriate ad group.
Improving keyword quality can also be accomplished by adding additional and appropriate keywords to your list(s) of negative keywords.
Use Retargeting Techniques
Retargeting, also known as remarketing, allows you to reach out to people who have previously visited your site by displaying relevant ads on other sites to entice them to return to your site and, perhaps, convert them into potential customers.
These are essentially hot leads to whom you can return with a persuasive offer. Retargeting tactics can be highly profitable and help raise conversion rates and lower acquisition costs.
Boost your Quality Score
The definition of quality score is “Google’s rating for quality and relevance of both your keywords and PPC advertising; used to calculate cost per click; multiplied by maximum bid to calculate ad rank in the ad auction process.”
Once you’ve successfully developed narrower and more relevant keyword groupings and improved the user experience, your ad’s efficacy and clickability will most certainly improve.
As a result of the improved clickability and relevancy, your Quality Score will improve, resulting in lower costs per click, hence lowering your CPA and overall cost.
Optimization after Click
Improving engagement and conversion rates on your landing pages after the click can be game-changers in terms of size and efficiency.
Google’s Page Speed Insights can be an excellent tool for identifying technical improvements to your website.
Dynamic content, such as headlines, can be designed to allow advertisers to change the content to make it more interactive and catchier, which creates higher chances of clicks and a greater probability of reduced CPA.
