Cost per action, or CPA – or cost per acquisition – is a metric that measures how much your business pays in order to attain a conversion (complete purchase or sign-up action). Generally, your CPA will be higher than your CPC (cost per click) from PPC (Pay Per Click Campaigns), because not everyone who clicks your ad will go on to complete your desired action, whether it’s making a purchase or filling out a form to become a lead. Cost per action takes into account the number of ad clicks you need before someone converts – in order words, improving your conversion rate will lower your CPA!!!!
And, what determines your CPA? Your CPA is directly affected by your Quality Score, Google’s all-important metric. This is based on the quality of your keywords, ads and of course landing pages. In general, the higher your Quality Score, the lower your Costs. The fact is, for each point your score is above the average Quality Score of 5, your CPA will drop about 16%.
Keeping your Quality Score high and your CPA low can be a huge benefit to your PPC budget over time, giving you the opportunity to buy more exposure in the online advertising space and optimize the number of conversions that come from your ad spend.
How Quality Score (QS) Affects Cost Per Action (CPA)
AdWords Quality Score affects your cost per click, and I believe this is well known. But not everyone realizes that Quality Score is very important in determining your cost per conversion.
When you plot average CPA against impression-weighted Quality Score, you see a strong correlation: The higher the Quality Score, the lower the cost per action.
Better, more relevant ads generally get higher CTR (click-through rates), so CTR is one of the major components of Quality Score. Other main factors that influence your QS include:
- The relevance of your keyword to its ad group
- Landing page quality
- The relevance of your ad text
- Your historical account performance
In other words, optimizing for Quality Score and optimizing for CPA are essentially the same thing.
Likewise, having a below average Quality Score will increase your CPA, relative to your competitors, which hurts your overall ROI.
What Is CPA – Bidding (Cost Per Action Bidding)?
CPA – Bidding is a method of paid advertising that allows you to tightly control your advertising spend. Rather than paying Google for every time someone clicks on one of your ads (as with CPC bidding), CPA – bidding only requires you to pay for each conversion. This is a metric you define yourself when you set up each online campaign. This action might be a sale, a lead, a download, or some other conversion you define. CPA advertising can help you avoid spending money on search terms that may not be directly driving business. If one of your ads displays in a SERP (Search Engine Result Pages) and does not match up with the searcher’s intent, you’ll only pay if the searcher engages with the ad and ultimately converts.