As mobile marketers, ensuring every marketing dollar contributes to business goals is pivotal.
Reports state that mobile advertising spending worldwide will cross $400 billion, up from just over $360 billion the previous year.
This substantial 11% annual increase reflects why maximizing ad efficiency is more important than ever.
No one wants to invest in ads that don’t deliver tangible results.
However, that’s not always the case.
That’s where the cost-per-action (CPA) pricing model comes into play.
Unlike traditional models focusing on clicks or impressions, CPA tracks real user actions—whether app installs, sign-ups, or purchases.
With CPA, you’re not just paying for traffic. It’s a strategic investment that offers measurable outcomes and can enhance your bottom line.
Understanding CPA is crucial whether you manage marketing for a mobile app or are seeking solutions to optimize your campaigns.
This post will explore what CPA is and how it can strengthen your marketing strategy.
What Is Cost Per Action (CPA)?
Cost per action (CPA) is a pricing model where marketers pay media sources or ad networks when a user performs a specific action after engaging with an ad.
These actions can comprise signing up for a newsletter, downloading an app, buying something, or filling out a contact form.
The key highlight of the CPA model is that it allows advertisers to focus on actions that lead to conversions. This ensures their spending is tied to measurable outcomes.
Here’s a quick example to consider.
Imagine you’re managing a marketing campaign for a gaming app with the primary goal of increasing user acquisition.
Here’s how to implement the cost-per-action (CPA) model.
- Define the Specific Action: You set app installation as the target to achieve your mobile app’s growth.
- Set the CPA Rate: Considering your marketing budget, you set a CPA rate of $30 per app install.
- Run the Campaign: Next, you launch the ads across various platforms—social media, influencer marketing, and mobile ad formats like banner ads and native ads to drive traffic to the download page.
- Measuring Outcomes: Now, you track performance through a mobile attribution platform. You calculate how many installs came directly from your ads.
- Calculating Costs: Say – 80 users installed your app from the campaign.
Total Cost = CPA Rate × Number of Installs
=$30 × 80
= $2400
This way, you can calculate the mobile advertising spend and allocate budgets to the most effective channels. This can optimize the marketing budget while driving desired user actions.
How to Calculate CPA
Calculating CPA is straightforward.
Here’s how to calculate the cost per action:
Determine the expenses related to your marketing campaign, such as ad spend, creative costs, and any additional fees. For instance, if you spent $2,000 on ads and $500 on creative, your total cost would be $2,500.
Next, state the specific action you’re measuring (e.g., app installs, purchases, sign-ups).
Say your campaign resulted in 100 app installs.
- Total Cost of Campaign: $2,500
- Total Actions Taken: 100 app installs
Applying the cost-per-action formula –
CPA = $2,500 / 100 = $25
Here, the CPA is $25, reflecting the $25 you spent on each app installed from your cost-per-action marketing campaign.
Significance of CPA
CPA is a must-have for mobile marketers.
The key reason? You only have to pay for actions that matter—like app installs or purchases. Hence, no budget gets wasted on views or clicks that don’t convert.
For instance, if you’re running a campaign for a banking app, you might set a CPA rate of $50 per install. When 100 users download the app, you know exactly what you’re paying for—$5,000 for real conversions, not just impressions.
Besides, it’s perfect for mobile attribution. You can see which channels drive user actions. For instance, you can identify whether influencer ads convert users or social media channels. This can help you make informed and accurate decisions.
Tracking CPA can help dig deep into your funnel, focusing on outcomes beyond installs. For instance, you can see if users make in-app purchases or sign up for subscriptions.
Comparing CPA with Other KPIs
Now that you’ve understood what is cost per action (CPA), let’s discuss how it differs from some other crucial KPIs.
- CPA vs. eCPA
Cost per action (CPA) considers the cost of specific user actions, like app installs. On the other hand, effective CPA (eCPA) evaluates the average expenses of all actions, including the ones that didn’t lead to conversions.
For instance, if you spend $2,500 and generate 100 installs, the CPA would be $25.
However, if you include actions like clicks, your eCPA might reflect a broader view of campaign effectiveness. - CPA vs. CPM
Cost per mile (CPM) measures the cost per 1,000 impressions. This makes it ideal for brand awareness campaigns that aim to boost reach rather than expect direct actions.
For instance, if you spend $1,000 for 100,000 impressions, the CPM is $10, while CPA only counts costs when users take the desired action. - CPA vs. CPC
Cost per click (CPC) is the amount spent for each click on the ad. This focuses on driving traffic to your site or app, while CPA only counts costs when the user takes a specific action.
For instance, if you pay $1 for each of 1,000 clicks but only 50 results in app installs, the CPA would be $20. - CPA vs. CPI
Cost per install (CPI) is a specific type of CPA that focuses on the cost associated with app installs.
For instance, if you run a campaign and spend $3,000 for 300 installs, the CPI is $10. This is a narrower measurement compared to CPA, which can include various actions like sign-ups or purchases.
What Is a Good CPA?
A “good” CPA is subjective to your app’s vertical and the specific KPIs of your campaign.
However, as a rule of thumb, your campaign should aim to acquire users at a profitable cost.
Simply put, the average revenue per user (ARPU) should exceed CPA.
Understand your app’s market and compare it to industry benchmarks to set realistic CPA goals. A good CPA should help sustainable growth while ensuring your marketing efforts translate into revenue.
5 Tips to Lower Your CPA
We’ve seen there’s no “good” CPA. However, we figured out that the lower the CPA, the better. Here are the top five tips to lower your CPA and prevent it from impacting your budget.
1. Reach the Right Audience
This is a no-brainer – precise targeting helps you reach the most likely convert audience.
So, segment your target audience carefully to achieve positive outcomes.
For instance, if you’re promoting a mobile gaming app, target users who have previously shown interest in gaming content. Leverage mobile app analytics tools to create specific audience segments based on behaviors, demographics, or interests.
This tactic ensures your ads reach the most suitable users, thus lowering your CPA.
2. Build Relevant Creative Assets
Crafting ad creatives that are highly compelling and convey your message can get half of your work done.
It can grab eyeballs, helping you reach the right audience and encouraging user actions.
For instance, while promoting a banking app, CTAs like “Keep Your Money Safe” rather than “Download Our App Now” can be more effective.
Besides, using compelling images that resonate with your value proposition can make the campaign stand out.
In this example, you can portray people using the app as satisfied. Add user testimonials or success stories to make the ad more valuable and trustworthy.
The right creative can boost engagement and conversions.
3. Raise Your Ad Quality Score
The more relevant the content, the better the ad quality score.
For instance, if you manage a finance app, ensure your ads feature keywords related to budgeting and saving. Incorporate phrases like “Master Your Finances” to attract users seeking financial solutions.
Align your ad messaging with the finance app’s benefits. This can help ensure that potential users understand your value proposition.
A high-quality score can lead to lower ad costs and increased visibility.
4. Choose Your Goals Wisely
Your goals have an instrumental role in deciding your success. It gives you a roadmap and purpose to get things done.
So, set a realistic goal and then implement a targeted plan.
For instance, if your goal is to drive in-app purchases for an eCommerce app, target your campaigns on actions like “Complete Your Purchase” rather than “Sign Up.”
This tactic ensures that your marketing efforts directly contribute to revenue generation.
Most importantly, you must set clear KPIs that are aligned with the goal. This can help you gauge the effectiveness of your efforts.
5. Protect Yourself from Fraud
Implement a comprehensive fraud prevention strategy to guard against CPA fraud.
For instance, if you’re running ads for a travel booking app, invest in solutions that help track user activity in real-time.
This can help detect irregular patterns, such as unusually high engagement rates, that might be fraudulent actions.
Fraud prevention ensures that your budget is effectively allocated to genuine user interactions. The outcome? Good CPA performance.
How Can Apptrove Enhance Your CPA Campaigns
Optimizing CPA campaigns can help drive high-quality installs and lower acquisition costs.
Our robust mobile measurement partner (MMP), Apptrove, can empower you to achieve the goal.
With state-of-the-art features like precise mobile attribution, detailed insights, and mobile app analytics, Apptrove can help optimize campaigns and boost overall ROAS (Return on Ad Spend).
Here’s how:
1. Accurate Attribution and Unified Analytics: Apptrove offers accurate tracking and attribution. Its unified dashboard helps you check campaign performance across mobile, web, CTV, and gaming consoles.
You can gain in-depth insights into user behavior, acquisition trends, and engagement rates. This way, you can identify the best-performing media channels and allocate your budget rationally, thus reducing CPA.
2. Granular Reporting for Accurate Decision-Making: Leveraging Apptrove’s granular reporting capabilities can help you drill down into data on audience segmentation and user actions.
With its customizable reports, you can measure acquisition rates across each channel, partner, and region. Besides, you can track and optimize KPIs like LTV (Lifetime Value), engagement, and retention. This ensures that your CPA campaigns are always data-driven, leading to improved conversions.
3. Fraud Prevention and Customized Validation Rules: Apptrove’s advanced fraud prevention shields are customizable. It allows you to create validation rules for each partner or campaign.
With multi-layered fraud protection, Apptrove ensures that your ad spend isn’t wasted on bot traffic, click spamming, or device farms. This secures your budget from fraudulent sources and lowers CPA.
4. Customizable Deep Linking and Audience Segmentation: Deep linking can prove a game-changer for creating seamless user journeys that boost conversion rates. In fact, Google states that deep-linked ads have a 2x higher conversion rate compared to traditional mobile ads.
Apptrove’s deep linking suite enables precise targeting by directing users to specific in-app content, thus maximizing user engagement.
Coupled with advanced audience segmentation, you can target users based on their app behavior, demographics, and acquisition source. This ensures your CPA campaigns reach the right users with the value proposition.
What’s more? Given that the retention rate of mobile apps after 90 days is around 29%, Apptrove can help segment and retarget users effectively to keep them engaged beyond the initial install.
Summing Up
The cost-per-action (CPA) model is a powerful approach for mobile marketers seeking to optimize their ad spend and drive measurable outcomes.
It helps ensure that your budget is invested in real conversions. The five tips shared in this post can help you get started.
What’s more? Leveraging our best-in-class MMP – Apptrove can help you gain actionable insights, track performance, and prevent fraud. Its advanced features can help your business reap the benefits of mobile marketing, such as increased user engagement and improved conversion rates, thereby lowering the CPA. Connect with our team to start tracking your mobile advertising campaigns effectively.