‘Cost per acquisition’ is a term that often appears in conversations about marketing spend and campaign reporting.

Put simply, ‘cost per acquisition’ is the amount it costs you to acquire a conversion; this might be a sale or an enquiry for your services. Essentially, it’s the amount of marketing spend / marketing resource in cost terms, required to yield a sale or enquiry.

It’s a useful figure to calculate, as it provides you with an understanding of the effectiveness of a campaign, as your ‘cost per acquisition’ or ‘CPA’ can then be plugged into other profitability calculations.

If we think about the formula for cost per acquisition, then you can look at it as follows:

cost per acquisition = total marketing spend / total number of conversions

“I spent £200 on marketing, and we have had 10 new sales enquiries. Our cost per acquisition for the campaign was £20.”

Without a figure for average cost per acquisition, it’s very hard for you to understand whether or not your marketing spend is effective, or whether a particular channel is better or worse in terms of delivering conversions at the lowest possible cost.

If you are running a marketing campaign, one of the most common metrics that you can use to understand performance is ‘cost per acquisition’. This tells you how much money you need to spend to gain a given conversion.

This metric can help you to understand which piece of content, audience or channel results in the most conversions for the least investment. Which can also help to identify which channels are not suited, or alternatively can be optimised to deliver a better cost per acquisition.

If you have Google Analytics tracking setup on your site then you can calculate this yourself by taking the figure for overall spend and comparing that with the number of conversions for a particular channel.

Some platforms such as Facebook or Google Ads will also calculate this automatically for you, but for both platforms you will need to configure some tracking code to record each conversion on your website.

To calculate cost per acquisition, you need spend data on your campaigns, the number of conversions, and a simple calculation.

There are a lot of factors that can affect the cost per acquisition of your marketing. Audience, campaign effectiveness and acquisition type all play a significant part in how much it will cost for you to acquire a lead or sale.

For example, if your conversion objective is a download of a PDF, then it’s likely that your cost per acquisition will be quite low, especially when compared to your cost per acquisition for the sale of a high price item on your shop site.

This comes down in part to the barrier to entry, in the case of the PDF download, this is a free action that a visitor can take which most people are likely to do. There is almost no barrier to entry to download the PDF (bandwidth and the frustration of PDFs aside!) – whereas a high price item on a shop site such as a television or a laptop might require careful consideration, research and ultimately budgetary constraints to be taken into account.

Typically, the higher up the conversion funnel your conversion action is, the more expensive it is likely to be to acquire a customer – but the more valuable that customer  is to you. So it’s important to see CPAs in the context of the type of acquisition they are, and how likely a website visitor is to perform a particular action.

A ‘good cost per acquisition’ depends totally on the amount of revenue that you gain from each conversion. If your cost per acquisition is £10 but each of your sales is worth £1000, then that £10 cost per acquisition is very low and you should be very pleased! If, your cost per acquisition is £10 but each of your sales is only £13, then you might want to rethink your marketing and try some new strategies to reduce that cost per acquisition.