Definition
Cost Per Acquisition or CPA is a metric used by the marketing departments of companies to estimate the aggregate cost of acquiring a customer through a campaign. CPA helps companies measure their marketing success.
Example
CPA is calculated as the cost of a campaign / number of conversionsSuppose Vareto runs an online campaign for its latest service offering for SaaS companies. The budget for this campaign is $500. Once the campaign ends, Vareto has 20 sales. CPA for this campaign = 500 / 20 = 25 or CPA = $25. This means each of the sales/acquisitions cost Vareto $25.
Why it matters
Cost per Acquisition is a crucial metric to be tracked by marketers as it gives an estimate of how much it costs to get new customers and it further helps companies determine whether the marketing strategy is working or needs to be revised.Cost per Acquisition can also be used to gauge the overall revenue generated from a marketing campaign.It is also essential for businesses to evaluate how they can reduce the Cost per Acquisition.