What you pay in ad spend, on average, for one conversion, such as a purchase or a sign-up. Google Ads shows it as cost per conversion.
Formula
CPA = ad spend ÷ number of conversions
Example
Meera spends ₹1,00,000 and gets 200 online orders, so her CPA is ₹1,00,000 ÷ 200 = ₹500. Each order is worth ₹2,000 and leaves ₹1,400 after the clothes cost, so ₹900 remains after paying for the ad.
How you'll hear it
“Our CPA on the Diwali campaign is ₹500 against a ₹1,400 gross profit per order, so we have room to bid up.”
What it helps you decide
The most you can afford to pay for a conversion, and therefore your bids, budgets and which campaigns to keep. Compare CPA with the gross profit one conversion brings in.
Where people misread it
People judge CPA on its own, without the profit per order next to it. A ₹500 CPA is cheap for a ₹2,000 order and ruinous for a ₹500 one. CPA also counts repeat buyers, so it can look better than the true cost of winning a new customer.
The story
Meera's agency reports a CPA of ₹500. She has no idea whether that is good. The answer lives in her own numbers, not in any benchmark.
| Ad spend | ₹1,00,000 |
| Orders | 200 |
| CPA | ₹500 |
|---|
| Average order | ₹2,000 |
| Clothes (30%) | −₹600 |
| Ad cost (CPA) | −₹500 |
| Left per order | +₹900 |
|---|
So the ceiling is ₹1,400. Pay more than that per order and each sale loses money before rent. At ₹500 she has room, and 200 orders × ₹900 = ₹1,80,000 towards her ₹2,40,000 of fixed costs.
What CPA hides: 40 of the 200 orders came from people who had bought before. They were retargeted, and many would have come back anyway. The cost of winning a new customer is higher. That is what CAC measures.
Look at CPA against profit per order, and look at CAC before you decide to scale.
All figures are illustrative.
Work out your CPA and what each order leaves
The example's numbers are filled in. Replace them with yours.
Each order pays for its product and its ad. Check whether the total left covers your fixed costs.
Don't confuse it with
Related terms
Want to use this at work? AI-led PPC Excellence is aFactor's 16-week program for paid ads.
Sources
- Cost Per Acquisition: What It Is and How To Calculate, Shopify
- Conversion rate: Definition, Google Ads Help