What is the Cost Per Action Model?

What is the Cost Per Action Model?Cost per action (CPA) refers to the digital performance pricing model where advertisers pay media sources for a specific action taken by a proposed customer.

These advertisers use various methods to run an advertising campaign. They use search engines and other internet publishers to host their ads; you can trigger CPA through how many times someone clicks on the ad, every 10,000 people who see it, or every time it activates a market-related action.

Letting people register and grab free trials also garners commercial leads, and sales get you instant cash.

Cost Per Action vs. Cost Per Acquisition

Although people use these terms interchangeably, cost per acquisition refers to the “financial metric used to measure the costs of acquiring one paying customer.”

Why is CPA Effective? 

It’s one of four payment models frequently associated with CPA mobile marketing campaigns. The others include:

  • CPI – Cost per install
  • CPM – Cost per mille
  • CPC – Cost per click

As advertisers have become more adept at using their tools, resources, and techniques, pure performance models’ demand has increased; this allows them to pay only for the most desired outcome.

The CPA also encourages performance marketers who were initially skeptical about spending money on advertising not directly associated with actual value. Now, receiving advertising budgets from performance marketers is easier for media sources.

Calculating CPA

Calculating CPA can become convoluted with certain formulas, but the most basic one is:

CPA = Total marketing spend (month/year) divided by total numbers of customers acquired

An acquisition becomes more expensive when you require more touch-points before a conversion. To calculate your CPA for a specific marketing channel, adopt figures suitable to that channel.

For example: spending $100 on Youtube ads and acquiring ten new customers would make your CPA $10 per new Youtube acquisition only.

Tracking CPA

CPA campaigns are created based on the delivery of action, so tracking should be imperative. The most commonly used tracking methods for eCommerce stores include:

Voucher Codes 

Online retailers use voucher codes as a comfortable and cost-effective tactic for shoppers to enter sales checkouts. Using voucher codes is practical with both email and social media campaigns.

Google Analytics

Tagged links indicating the medium, source, and campaign allow you to track your conversions. You may also play around with implementing a tracking code on a “thank you” page, depending on the action you’d like to track; it’s frequently used to get an accurate number of subscriptions or completed downloads.

Optimizing Your CPA 

Your CPA becomes an effective tool when you determine the value a specific customer’s actions bring to your business. It enables you to enhance lower CPA costs and set appropriate advertising budgets until marketing campaigns are lucrative.

Steps to optimize your CPA include
  • Fine-tuning your CPC campaigns
  • Obsessing about CRO (conversion rate optimization)
  • Setting up numerous goals

A CPA model is a perfect choice because it reflects directly on the benefits of market campaigns that allow for minimal cost risk with advertisers.