What Is Cost Per Acquisition (CPA)? Formula and Calculator

Cost per acquisition (CPA) is an essential advertising metric – tracking it is a must! Keep reading to learn what it’s all about, how to calculate it, and what is considered a good CPA for different industries.

I’ve also included some tips on how to reduce cost per acquisition.

What Is Cost Per Acquisition

Essentially, it’s how much you spend on advertising or other marketing efforts to get one customer who actually buys something or signs up for your service. This number helps you understand whether your marketing is cost-effective.

In the mobile app and gaming industries, cost per acquisition refers to the cost of acquiring a new user who installs and engages with a mobile application.

What is the difference between CPC and CPA?

CPC (Cost Per Click) and CPA (Cost Per Acquisition) are two ways to measure the cost of an advertising campaign, but they focus on different parts of the process.

With CPC, you’re looking at how much you pay every time someone clicks on your ad, regardless of what they do after that click. It’s purely about the initial interaction.

On the other hand, CPA gives you a picture of how much you’re spending to actually get a customer to complete a specific action, like making a purchase, signing up for a service, or installing an app.

Cost Per Acquisition Formula

The general formula for calculating Cost Per Acquisition is:

In mobile app marketing, CPA is calculated by dividing the total cost of a campaign by the number of new users acquired through that campaign. This includes all expenses related to the campaign, such as ad spending across various platforms like Google Ads, Facebook, Instagram, or other ad networks that cater to mobile apps.

The significance of CPA for mobile apps lies in its direct connection to the return on advertising spend (ROAS). A lower CPA indicates a more cost-effective acquisition strategy, suggesting that the company is spending less to gain each user, which can lead to higher profitability, especially when the lifetime value (LTV) of a user exceeds the CPA.

How to Calculate Cost Per Acquisition?

You need two pieces of information to calculate CPA:

1. Total Campaign Cost: This is the amount of money you spent on a specific marketing campaign. It includes everything from advertising costs, agency fees, to any other expense directly related to the campaign.
2. Number of Acquisitions: This is the total number of customers or users who completed a desired action (like making a purchase or signing up for a service) as a direct result of the campaign.

Here’s how you use these pieces of information in the formula:

This calculation tells you that it cost you $20 to acquire each customer through your campaign. Using this metric, you can evaluate the efficiency of your marketing spend in terms of acquiring new customers.

Cost Per Acquisition Calculator

For a quick way to calculate CPA, use our cost per acquisition calculator:

What Is a Good Cost Per Acquisition?

Determining a good Cost Per Acquisition (CPA) really depends on your specific business, the industry you’re in, and the economic value of each customer to your company.

Here’s how you can think about what CPA you should aim for.

Average Customer Value

Understand how much revenue an average customer generates over their relationship with your business. This is often calculated as the average purchase value multiplied by the average number of purchases over a customer’s lifetime.

Profit Margins

Consider the profit margins of your products or services. You need to ensure your CPA is lower than the profit made from an average customer.

Benchmark Against Industry Standards

Different industries will have varying typical CPA values.

Marketing Objectives

If your strategy is to quickly gain market share, you might be willing to accept a higher CPA initially. Conversely, if you’re focused on profitability, you’d aim for a lower CPA.

Experimentation

It’s often about trial and error. Start by setting a CPA based on your customer value and profit margins, then adjust based on the campaign performance and market dynamics.

A good CPA is one where the cost of acquiring a customer is sufficiently below the revenue they generate. If your customer lifetime value is significantly higher than the CPA, you’re in a good position.

Cost Per Acquisition by Industry

Here are some recent benchmarks for CPA across various industries.

E-commerce & Marketplaces

CPA for the e-commerce industry is as low as $0.40, which indicates a potentially high volume and lower value per transaction typical of this industry​.

Healthcare & Wellness

The healthcare and wellness industry have higher CPAs around $3.60 and $3.04, respectively, likely due to the higher value and regulatory complexity of transactions.

Technology and SaaS (Software as a Service)

These sectors show CPAs of $1.38 and $1.52, respectively, reflecting the mid-range value of acquiring tech-focused customers who may have significant lifetime value.

Education

Stands at about $1.96, which may reflect both the competitive nature of this sector and the substantial commitment required from consumers.

Mobile Apps

In the mobile app industry, the Cost Per Acquisition (CPA) can vary widely depending on the platform and the region.

In addition, TikTok has emerged as a significant platform for user acquisition, with the Cost Per Install (CPI) ranging from $1.75 to $4.00.

This variation largely depends on the ad format and the engagement levels of the campaigns. These figures highlight the competitive and dynamic nature of mobile app advertising, where costs are influenced by the advertising platform, the type of creative used, and regional market conditions.

Reduce Cost Per Acquisition with Udonis

At Udonis, we understand that the key to successful mobile app and game marketing is not just attracting users but doing so cost-effectively. Our strategy focuses on several core areas to ensure we exceed your user acquisition goals while minimizing CPA.

Data-Driven Strategy

We leverage extensive data analytics to understand user behavior and market trends. This approach allows us to target your ideal user base with precision.

Optimized Ad Creatives

Advanced Targeting Techniques

By using sophisticated targeting methods, we ensure that your ads are seen by people most likely to be interested in your app or game. This includes demographic, geographic, behavioral, and contextual targeting.

A/B Testing

Constant testing is part of our ethos.

We rigorously A/B test different aspects of our campaigns, from ad creatives to landing pages. This method helps in fine-tuning the campaigns and significantly lowers the CPA.

Multi-Platform Strategy

We don’t rely on a single platform. Instead, we strategize across multiple platforms to diversify the user acquisition sources, which helps in finding the most cost-effective channels and balancing the CPA.

Retargeting and Remarketing

We implement retargeting strategies to re-engage users who have shown interest but haven’t converted yet. This maximizes the initial marketing spend and further reduces the overall CPA.