How to calculate the cost per acquisition (CPA)

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Along with CPC, CPA is a crucial indicator for estimating the costs of your Instagram advertising. CPA stands for cost per acquisition and tells you how much it costs you to convert a customer into a purchase. To operate profitably, your CPA should always be significantly lower than your selling price. CPA is also an important factor for bidding and determining your target costs – more on that later. Sometimes, CPA is referred to as CPO (cost per order), but they essentially mean the same thing.

So how do you calculate CPA? This requires a few more KPIs. We'll walk you through the process step by step:

Step 1: The Conversion Rate (CR)
The conversion rate indicates what percentage of those who click on your ad and thus land in your online shop actually make a purchase. The conversion rate therefore depends on your shop and your product. To calculate it, you need to know how many purchases your shop generates relative to the number of website visitors.

CVR % = (Conversions / Visitors) x 100

If you don't have any experience yet, you can use this as a guideline. The average uruguay phone number data conversion rate in e-commerce is around 2-4%.

Step 2: The required clicks
Using the conversion rate, you can now calculate how many clicks are necessary to achieve a conversion, i.e., a purchase. The formula is as follows:

1/Conversion rate = Required clicks

Also:

So if we assume a conversion rate of 2.5%, 40 clicks on your ad are necessary to generate a purchase.

Step 3: The CPA
Acquisition therefore means conversion. Accordingly, in the final step, we simply need to multiply the already known CPC by the required clicks:

required clicks * CPC = CPA

On average, you pay €12.40 for a purchase. This underlines once again that your AOV for a purchase should definitely be significantly higher than this value to be profitable. Of course, you can also lower this value by, for example, lowering the required clicks per conversion or the CPC. Since the CPC depends on the CPM, which in turn depends on your selected target audience, testing different target groups for your ads can have a positive effect.