In a nutshell: What is the cost per action?
Cost per action (abbreviated to CPA) is an indicator of the cost of a specific action (e.g. lead generation, newsletter registration or sale). It is often used in marketing when advertising is placed via advertising networks.
What does cost per action (CPA) mean?
If advertising is placed on the Internet, a certain budget is available for this. The CPA value is calculated by dividing the total costs by the number of conversions or actions achieved.
This makes it much easier for advertisers to obtain an overview of costs. This tells them how effective certain advertising measures, ad types or advertising networks are.
The formula for calculating the cost per action is simple:
(total cost of a campaign) / (number of conversions = CPA)
Example:
(500 € advertising budget) / (300 leads) = 1.66 € per lead
The calculation of the CPA is used in various areas, industries and, above all, behaviors.
These include, among others:
- Downloads of programs or PFDs
- Subscribe to a newsletter
- Sales of one product
- Conclusion of contracts
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When is a CPA good?
It is impossible to say in general terms when a CPA value is good. Factors such as target group, company and other values play a decisive role here. For example, the price of a product to be purchased is an important factor.
If an advertiser wants to sell high-priced products on the Internet where long-term customer loyalty is common, the costs are usually significantly higher.
By contrast, prices are lower for smaller products such as digital info products. Accordingly, it is also possible to achieve interesting, low CPAs with a small or medium advertising budget.
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What advantages does CPA offer?
If the CPA remuneration method is chosen, this results in a transparent cost structure. This means that every action achieved (conversion) has a specific, agreed price. If an advertiser places ads, his risk is very low. The profitability, on the other hand, is much higher and better.
Is CPA an important factor in search engine optimization?
If advertisers use the CPA model on their website, it does not play an important role in connection with search engine optimization (SEO). This is because all visitors and potential prospects come from a paid search or advertising and have no organic search background.
Search engine optimization is only important in order to achieve good CONVERSION RATES to achieve good conversion rates. This is the only way to generate an action from website visitors.
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Conclusion: What is cost per action?
Used correctly, the cost per action (CPA) billing model can be quite interesting. It is important not to just blindly place any advertisements. Interested parties should carefully consider the topic beforehand and coordinate everything precisely (target group, product, target page).
