Cost Per Action (CPA)

Joran Hofman
April 3, 2021

What is Cost Per Action?

Cost per action (CPA) is a digital advertising payment method that lets advertisements be billed only for a specified action taken by a might-be customer. All actions that the models cover are directly related to some kind of conversion, be it a sign-up to a link click or determined by the advertiser.

How much does Google Ads cost?

Many direct their ad spend to one of the most know advertising services known as Google Ads (previously known as Google AdWords). While Google Ads offers an honestly impressive return on investment (ROI) of $8 for every $1 spent, many new businesses think about the cost of getting into Google Ads and guess how much they should spend on it, as it is a new venue for them to explore.

The thing is that the average cost-per-click (CPC) on Google Ads tends to be from $1 to $2 for the Google Search Network and less than $1 for the Google Display Network. Generally, small to mid-sized companies will spend around $5000 to $10,000 per month on Google Ads, which doesn’t even include additional costs, like software or hardware.

What's the Average Cost Per Action in Google Ads?

The Average Cost Per action is the amount that someone has been charged for a conversion with ads. The average cost per action (CPA) is calculated by dividing the total cost of conversions by the total number of conversions. 

  • For example, if an ad receives two conversions, one costing $3.00 and one costing $4.00, it means that the average CPA for those conversions is $3.00.
  • Average CPA is based on the actual CPA (the actual amount someone is charged for a conversion from their ad), which might be different from their target CPA (the amount someone has set as their desired average CPA if they’re using Target CPA bidding).
  • Utilizing performance targets to set an average CPA target as a goal for all campaigns in a campaign group.

How do you calculate Cost Per Action?

The formula for calculating Cost Per Action (CPA) goes by calculating the cost divided by the number of actions being measured taken into account. For example, if the expenditure is $140 on a campaign and the number of actions attributed for this campaign is 10, this would give the campaign a cost per action executed of $14.

Ways to lower Cost per Action.

Lowering the cost per action is a method that some marketers use to reduce expenses of their digital campaigns; since they’re billed by actions that prospective customers do. They only have a set amount of actions attributed to their campaign, some marketers look for ways to lower their cost per action, doing things like:

·         Lowering their bids.

·         Finding more specific keywords to use in their digital marketing, in most cases targeting keywords with wide space to interpretation might be unwise. Having shorter keywords more focused in their field might help lower their CPA.

·         Increasing the Quality Score might also help to lower the CPA.

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