What is Cost Per Acquisition (CPA)?
Cost Per Acquisition (CPA), also known as Customer Acquisition Cost (CAC), measures how much money a business spends to acquire a new customer. It's a critical marketing metric that helps determine the efficiency and profitability of marketing campaigns.
The CPA Formula
CPA = Total Marketing Costs / Number of New Customers
This includes all costs associated with acquiring customers: advertising, marketing staff, tools, and any other related expenses.
Why CPA Matters
- Marketing Efficiency: Measures how effectively you convert marketing spend into customers
- Budget Allocation: Helps determine which channels deliver the best ROI
- Profitability: Ensures you're not spending more to acquire customers than they're worth
- Growth Planning: Helps forecast costs for scaling customer acquisition
How to Use This Calculator
- Enter your total marketing spend for the period
- Enter the number of new customers acquired
- Optionally add average order value to see ROI
- Add profit margin to calculate profitability
- Set a target CPA to compare performance
CPA vs. CAC
While often used interchangeably, CPA typically refers to the cost per conversion or action (could be a lead, sign-up, or sale), while CAC specifically refers to the full cost of acquiring a paying customer, including sales costs.
What's a Good CPA?
- CPA should be lower than customer lifetime value (CLV)
- Industry benchmarks vary significantly
- E-commerce: $10-50 typical range
- SaaS: $100-500 or more depending on contract value
- Financial services: Often $100-300+
Ways to Reduce CPA
- Improve ad targeting and relevance
- Optimize landing page conversion rates
- Test different marketing channels
- Leverage organic and referral marketing
- Improve customer onboarding and activation
