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Cost Per Action

What is Cost Per Action:

Cost Per Action is a metric that measures how much an eCommerce advertising team pays in order to attain a conversion. Cost Per Action allows teams to better control ad spend for their objectives, since the metric is designed to only charge for an ad when a defined action is completed.

The data for this metric can be found in paid advertising tools such as Facebook Ads.

How to calculate Cost Per Action:

The formula for calculating Cost Per Action is taking the total spend divided by the total number of defined conversions.

Notes

- Make sure to define your action, for eCommerce teams this could be a sale, a subscribe, or jumping on a waitlist.

- In Yaguara Cost Per Action can be created as a Key Result.


Why Cost Per Action is Important:

While not necessarily reinventing the wheel, Cost Per Action does evolve advertising strategies. The key before your begin is understanding how much a particular customer’s action is worth to your eCommerce business. Then budgets can be properly set and continuously optimized to lower CPA costs until Return on Ad Spend makes fiscal sense.

This version of advertising can help you avoid spending money on placements, search terms, and activities that are not directly driving eCommerce revenue.

How to improve Cost Per Action:

Location is everything

If you are using a network such as Facebook, there are various placements for ads: Audience Network, News Feed, Mobile placements, Instagram, Stories, etc. As the campaign continues make sure to pull levers on the placements that aren’t converting to salvage your marketing budget.

A/B testing

By A/B testing your landing pages your team can control the latter half of the CPA handshake, since ad copy and placement can only factor into conversions to a certain degree.

Quality Control

Quality Score for networks such as Google Ads affects not only Cost per Click, but Cost Per Conversion. Sitting down and understanding this mathematical domino effect of CPA budgets can save major margins.

Go beyond the program

Last but not least make sure your action has serious value to the company, otherwise spending money on non-ROI or impactful events is a waste of time for all parties involved.

Trusted Advice on Cost Per Action:

All About Adwords Quality Score via Hootsuite

How to Do A/B Testing With Landing Pages: A Complete Guide via Crazy Egg

The 2019 Facebook Ads Benchmarks via Instapage