Cost Per Action (CPA): How to Lower Your CPA in AdWords
Cost per action, or CPA – sometimes referred to as cost per acquisition – is a metric that measures how much your business pays in order to attain a conversion. Generally, your CPA will be higher than your cost per click, or CPC, 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. Along with CPC, your CPA will contribute to your overall Google ad costs.
So, what determines your CPA? Like most things PPC, your CPA is directly affected by your Quality Score, Google’s all-important metric based on the quality of your keywords, ads, and landing pages. In general, the higher your Quality Score, the lower your costs – in fact, 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 Affects Cost Per Action
It’s well known that Quality Score in Google Ads (formerly known as AdWords) affects your cost per click, but not everyone realizes that Quality Score is every bit as 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.
In other words, optimizing for Quality Score and optimizing for CPA are essentially the same thing.
The below table shows how much you’ll save on cost per action if your Quality Score is higher than 5:
Likewise, having a below average Quality Score will increase your CPA, relative to your competitors, which hurts your overall ROI.
What's the Average Cost per Action in Google Ads?
Average cost per action can vary widely depending on your business model and industry, but across all industries, our clients advertising on AdWords see an average CPA of $59.18 on the search network and $60.76 on display the display network. You can see average cost per action for 20 common industries in the graphic below.
Want to quickly see if your CPA is above or below average? Just enter your cost per action, currency and industry below to find out:
What Is 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, a metric you define yourself when you set up each 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 and does not match up with the searcher’s intent, you’ll only pay if the searcher engages with the ad and ultimately converts.
Larry Kim Recommends:
Now that you've learned more about ways to measure AdWords costs, download my guide "How Much Does AdWords Cost?" for more insight on optimizing your PPC budget!
Our software and services help businesses and agencies take the guesswork out of pay-per-click advertising so you get more from your marketing budget.