CPA: The Most Misunderstood Metric in Marketing

If you’re running any form of performance marketing activity, chances are that you’re doing it with the end goal of bringing in profit. You do this by bringing in as many conversions as possible for your brand, while keeping the amount you pay for each conversion (your CPA) somewhere below your profit per conversion, right?

This is the way that most of us think, either explicitly or implicitly, about performance advertising. The problem with it though is that it relies on the metric we call CPA, which is much less informative than it often appears on the surface. What might seem obvious, but what we also often forget, is that metrics like CPA are averages. Averages give us a top-line view of how much it’s costing us to bring in users, but a top-line view can often miss things out.

Let’s say that a channel brings in 10 customers for $100, giving it a $10 CPA. Sure, the average cost per acquisition is $10, but this tells us incredibly little about how much it cost us to bring in each of these customer. Just because the average cost per acquisition was $10 doesn’t mean that any of these customers individually cost anywhere near $10 to bring in.

It’s possible that the cost to acquire each customer looks something like the graph below, where we have customers on the x-axis, and the cost to acquire that customer on the y-axis.