Ways to Reduce CPA – Cost Per Acquisition in Google Ads?

Various metrics can be used to track pay-per-click (PPC) advertising. But what should you measure?

CPA is important if your goal is to make more sales and generate more profits. Meaning you want to lower your ad spend while increasing the number of visitors who make a purchase.

The cost per acquisition (CPA) measures the cost of acquiring a new customer.

Therefore, CPA stands for cost per acquisition or action in digital marketing. Essentially, this cost is the ability of a business to convert ads. In more specific terms, it’s a fee company pays whenever an ad leads to a sale. An advertiser pays a fee when an advertisement results in a customer taking an action.

This article will explain the cost per acquisition Google Ads. It will also explore how you can reduce CPA if you want to make your campaigns more cost-effective and profitable.

What is CPA in Google Ads?

To understand in business, cost per action (CPA), is a measure of how much you pay for a conversion. CPAs are typically higher than cost per click (CPC) since not everyone who clicks your ad will complete your desired action. In this case, it might be making a purchase or filling out a form.

The cost per action considers the number of clicks that must be made prior to someone converting. Therefore, improving your conversion rate will lower your cost per acquisition. Aside from CPC, your CPA is also a factor in your Google advertising costs.

What factors affect your CPA? The CPA is directly affected by the Quality Score. Your keywords, ads, and landing pages’ quality are determined by this important Google metric. Costs are generally lower when your Quality Score is higher. Your CPA will drop about 16% for every point above the average Quality Score of 5.

A low CPA and high Quality Score can have a huge impact on your PPC budget in the long run. By doing this, you will be able to buy more exposure online and increase the number of conversions from your advertising.

Why is CPA Important?

CPA is one of the most important metrics in marketing. CPA, unlike site visits or conversion rates, is a financial indicator that directly measures a marketing campaign’s revenue impact.

Your customer acquisition campaigns can be tailored to achieve a targeted CPA based on data such as:

• Average order value (AOV)
• And customer lifetime value (CLV)

This ensures not only new customers but also profitability.

How is the CPA formula calculated?

CPA = Cost to the Advertiser / Number of Conversions.

Alternate Equation

You can also calculate the CPA of a campaign using the CPC and Conversion Rate. The equation is as follows:

CPA = CPC ÷ Conversion Rate

Note: Calculate your answer using the Conversion Rate as a decimal. Thus, if your conversion rate is 5%, you should divide by 0.05.

Combining the CPA and CPC equations yields this equation. The equations are as follows:

CPA = Cost ÷ Actions

CPC = Cost ÷ Clicks

Conversion Rate = Actions ÷ Clicks

Rearranging the bottom two equations (CPC and Conversion Rate) to include Cost and Actions results in:

Cost = CPC x Clicks

Actions = Conversion Rate x Clicks

Substituting these values back into the CPA formula gives the following results:

CPA = (CPC x Clicks) ÷ (Conversion Rate x Clicks)

Therefore, we can simplify this as follows:

CPA = CPC ÷ Conversion Rate

Even though this formula has limited uses, it is still useful to know.

Smart Tool to Track Conversions and Cost in Google Ads

From the above discussion, it is clear why CPA measurement is important. But monitoring metrics in PPC Campaigns can be challenging without the use of marketing tools because they are interdependent.

Thus, you should continuously monitor your PPC campaigns from all angles, and PPC Signal is one of the best tools for this work. With the tool, you can monitor your campaigns using a data-driven approach. Additionally, it provides campaign information through signals. You need to use filters to get the signals.

The following is a screenshot of PPC Signal’s dashboard:

Using PPC Signal, you can track important metrics like cost and conversions for your campaign to determine your CPA. To do this, click on the Metrics filter and select Cost and Conversions. As shown below, once you select the metrics, all related information is displayed in the form of signals:

Below we can explore one of the important signals about Anomaly detected:

You can easily calculate the CPA based on the above signal information. To gain a deeper understanding of the signal information above, click the Explore button as follows:

You can easily understand the signal information by using the above representation. As a result, you can take action at the right time without wasting time and resources.

What is a Good CPA for Google Ads?

Let us understand what a good CPA is to help us understand the cost per acquisition Google Ads.

Cost per action is fundamentally determined by the value of every action, and the ROAS you aim for. In order to answer that question, you need to work backward.

An organization that is mature knows what its customers are worth. It also knows how to calculate the customer lifetime value (LTV) for segments that matter most to them.

Small businesses, mid-market companies, and enterprise companies often prioritize LTV for new and repeat customers.

You can estimate the monetary value of each action (e.g., a lead) based on the LTV and conversion rate.

Once you have this, you can factor in the level of efficiency (or scale) you desire.

All industries have an average CPA of $49.96 for search and $75.51 for display in Google Ads.

How is CPA Different From CPC?

So how is the cost per acquisition Google Ads different from CPC?

PPC advertising uses a similar term called cost per click (CPC), which is how much you pay when your ad is clicked. It doesn’t tell you if the click results in a conversion, however.

You only pay for a conversion event when you run a CPA campaign. CPA is a way to make sure you’re attracting high-quality prospects instead of just driving traffic.

The cost of conversions in a CPA campaign is higher than that of clicks in a CPC campaign, but you’ll pay for those who convert. Cost per acquisition Google Ads campaign is typically more profitable for marketers.

How does Google CPA work?

Let us explore how cost per acquisition Google Ads works.

Google CPA is a cost-per-action advertising program that allows advertisers to pay for completed actions, such as a purchase or sign-up. Advertisers only pay when a user completes the desired action, making it a more efficient way to spend marketing dollars. The program is available to all Google Ads advertisers, and it can be used with both text and display ads.

In order to participate in Google CPA, advertisers must first set up an account and select the desired actions. Once the account is approved, advertisers can then create their ads and start running them on Google’s network of websites.

When a user completes one of the specified actions, the advertiser is charged based on the amount they have bid. Overall, Google CPA is an effective way to reach potential customers and generate leads.

How to Reduce CPA in Google Ads?

To understand the cost per acquisition Google Ads let’s look at how to reduce CPA.

Understand your campaigns

The first thing you should do when trying to lower your CPA understands what’s happening in your campaigns. The best way to do this is by using a third-party tool like PPC Signal (which I highly recommend). With this tool, you can see what is happening to your PPC campaign from all angles.

Improve your sales funnel

If you have a solid sales funnel, then your CPA should be pretty low. If not, then there is plenty of room for improvement. You can split-test different offers or CTAs to increase conversions.

Optimize your landing page

If you have a landing page with poor conversion rates, then it’s time to optimize it. Again, split-testing is the best method for doing this. Try different headlines, CTAs, and offers in order to see what works best for your business.

Pay close attention to optimization

The point of PPC is to get more clicks, so you need to monitor your CTR and conversion rates. If they are decreasing over time, then it may be time for some optimization. You can also use this data to determine whether it’s worth continuing with the campaign or if it’s time to scale back.

Use videos for your ads

If you’re not already using them, it may be time to start. Videos are one of the most effective ways to increase your CTR and conversion rate because they provide a much better user experience than text ads. Users will probably spend more time on your landing page if it contains a video than if it is just text-based.

Capitalize on mobile

Now is a great time to use mobile-optimized landing pages and mobile ads. Mobile traffic is increasing yearly and will continue to do so for the foreseeable future. You mustn’t miss out on this opportunity.

Go over previous strategies

If you have been using the same strategies for a while, it may be time to reevaluate them. It’s always a good idea to look at what has worked in the past and see if any changes can be made. If you’re using retargeting ads, ensure they are still relevant and effective.

Improve your website performance

If your website is slow, it can be detrimental to your success. If users leave your site because it takes too long to load, then you’re losing out on valuable potential customers. So it’s so important to monitor how fast or slow your site is running. You should also look into ways to optimize your website for speed.

What is Cost Per Action Bidding?

Cost per action bidding is an important aspect of cost per acquisition Google Ads.

In CPA bidding, you are able to tightly control your advertising costs. With CPA bidding, you pay Google only when someone converts, rather than each time they click on one of your ads (as with CPC bidding). The conversion may take the form of a sale, a lead, a download, or some other action you define.

CPA advertising allows you to avoid spending money on keywords that may not be directly driving business. In the event that one of your ads appears on a SERP, but does not match up with the searcher’s intent. Only if the searcher converts after engaging with the ad will you be charged.

FAQs:

What should my target CPA be for Google Ads?

To give the algorithm some room to work correctly, you should set the Target CPA goal about 10% or 20% higher than the actual target. In this example, we recommend setting the goal at about $60.

Is a low CPA good?

Every business has a different ideal CPA – there is no set value. But having low CPA is always good but still if you think by paying more in customer acquisition can bring long term value to the business then high CPA may also be better in that context.

How many clicks is good for Google Ads?

Typically, the CTR for Google Ads should fall between 3 and 5%. This is considered satisfactory by most marketers. Many companies, however, have much higher average CTRs for Google Ads. Rarely do businesses have a CTR above 50%.

Wrap Up:

Google Ads is a powerful tool for advertising – but it takes time and patience to become a master. The goal of Google Ads is to attract clicks, which will convert into sales.

The best way to improve your Google Ads is through testing. Test different ad variations, bids, and targeting options until you find a formula that works for your business.

Cost Per Acquisition Google Ads gives you the ability to measure your cost per acquisition (CPA). Ensure your CPA is below your average sale price, or else you may lose money with Google Ads. A good rule of thumb is to keep your CPA under 5% or lower.