Measuring Marketing

Chapter 67 Cost Per Action

Measurement Need

To find out the cost of converting a prospect to a customer.

Solutioni

Cost per action (CPA) is calculated by:

$CPA=\frac{C}{C_v}$

Where

CPA = cost per action

C = cost

Cv = conversions

If a marketing team invests $50,000 in a search engine optimization campaign and attracts 1,000 new customers as a result, then the CPA is $50:

$\begin{array}{l}{V}_s=\frac{\$50,000}{\$1,000}\\ =\$50\end{array}$

As another example, let’s assume a company pays $.10 to a website for every completed transaction (and not per click) coming from a banner ad. If 1,000 people visit the website daily, 100 click on the banner and ten buy a product, then the cost of advertising on the website would be $1 per day ($.10 × 10 sales).

CPA is paid ...