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Cost Per Action Advertising CPA

home / ADWORDS BASIC / Cost Per Action Advertising CPA

Cost Per Action Advertising CPA

All business owners should aim to pay as little as possible for each advertising conversion. That is the rate at which people who click your ads perform the desired action. In most instances, it means how much you pay for each purchase compared to your total ad spend.

There are many ways in which it is possible to reduce your cost per action, and we’re going to offer some excellent advice on this page. We’ll keep things as simple as possible to avoid any confusion and point you in the right direction. Of course, sometimes you need to think of innovative ideas for the best results. However, you can usually make an improvement by following a standard process.

What is CPA?

In layman’s terms, CPA is how much you spend before a customer makes a purchase. It is highly dependent on your click-through rate and the relevance of your ads. Marketers who fail to make their ads relevant will always experience a higher cost per action.

However, those who refine their keywords and optimise their campaigns can create a price reduction. CPA is nearly always greater than your cost per click because it’s hard to encourage 100% of visitors to convert into customers. So, if you can increase your conversion rate, your CPA will decrease. Alongside your CPC, your CPA will directly affect your total Adwords advertising costs.

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What factors affect CPA?

As with most PPC advertising metrics, your cost per action is directly determined by your Quality Score. Google uses that rating to decide which ads to display to which internet users. People with a higher Quality Score should witness cheaper CPA because their ads show more frequently. So, it’s vital that you aim to impress Google by raising your Quality Score using some effective techniques. Research shows that advertisers with a score of higher than five will decrease their CPA by around 16%.

Why is CPA so significant?

The cost per action for your Adwords campaigns is meaningful for many reasons. Firstly, it’s the only way to determine the exact cost of your campaigns. You need that figure to work out your return on investment. Without it, it’s impossible to know if your marketing strategies are performing as expected. Many people think that getting more clicks is the best strategy for success. However, that couldn’t be further from the truth. 1,000,000 clicks don’t make a blind bit of difference to your operation if none of them convert into sales. Of course, 80% of people who spend money with the average business have already built a relationship with them. So, that figure doesn’t include the profit you might make from future sales to repeat customers.

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How can someone improve Quality Score?

You can find a more in-depth analysis of this issue on our Quality Score page. However, we’ll try to explain the basics one more time here. In most instances, the best way to improve your Quality Score is to make your ads more relevant. That means you need to perform extra keyword research and improve your landing pages. Google wants to present the best possible adverts to its users. So, people who use irrelevant keywords will always go to the back of the queue. That is the case, regardless of their maximum ad bid in most circumstances. Make sure you use the same keywords in your ads as you publish on your landing pages for the best results. Also, create a list of negative words and phrases that you don’t want to target. That should help to refine your results and boost your Quality Score. Again, you can check our Quality Score page for more information on that subject.

What are the best ways to lower CPA?

As we have just discussed, your Quality score directly affects your cost per action. However, there are many things you can do to reduce the amount you pay. These tips and tricks should help you to get better results from your campaign. Even so, you still need to mess around with different ideas and concepts if you want to stay ahead of the competition.

Reduce your maximum ad bids

All advertisers set a maximum bid for clicks when launching their campaigns. If you notice that your CPA is too high, you might like to reduce that figure. Just make sure you don’t lower it too much or your ads might never beat the competition. You need to find a suitable middle ground where you’re not spending too much for each click, but your ads still appear to the right audience. 

Target better keywords

It’s possible you might have a high CPA because your keywords are too broad. For that reason, you should perform some more research and try to identify better terms. Some excellent tools that could help you with the process. You just need to search online and read reviews to find the most useful ones around today. Of course, you can also make use of Google’s Keyword Planner. That’s a small application that appears within your Adwords account. It offers essential information about how many searches occur each month for various keywords. It also lets you know about the level of competition for each. So, hopefully, you will find words and phrases that are hot but not expensive.

Assess your offer types

The kind of ads you’re running can drastically affect your CPA. For instance, companies that drive people towards a free download will always pay more. That is because the initial action doesn’t create a sale. So, they might achieve 1000 clicks, from which 100 people decide to download the item. However, only a handful of those internet users might go back to the website later and make a purchase. That could mean that from 1000 clicks, the company only makes a couple of sales. So, their cost per action is never going to reach a suitable level.

Adjust the text used in your ads

Most marketers will run many different ads at the same time. That’s because it’s better to hedge your bets and then analyse the results. It makes it much easier for people to work out which elements of their advertisements make them successful. If you notice that some ads get a much lower CPA, you should try to determine why that happens. Perhaps you’ve used a friendlier tone in the advertisement? Maybe they all use the same keywords? By assessing your results in that manner, you can adjust your other ads and get better results.

What happens if advertisers ignore their CPA?

Put simply, people who ignore their CPA will never get the best outcomes from their campaigns. They’ll never understand how much they’re paying for each customer, and they won’t know their return on investment. That is not the best way to run an advertising strategy. While you will still attract people to your website, you won’t know if you’re making a profit. With that in mind, lowering your cost per action is essential if you want to beat competing firms. However, you need to make sure you don’t damage the quality of your ads. You will want them to reach as many people as possible from within your target market

If reducing CPA seems like an impossible task, help is at hand. You could always find a reputable agency like ours to undertake the work. In most instances, people working in the industry will know how to optimise your Adwords efforts and ensure you always make a profit. That would leave you with more time to focus on the progress of your venture.

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