Operations

Data Snacks Video — Cost Per Acquisition (CPA)

data-snacks-video-—-cost-per-acquisition-(cpa)

Extra information on cost per acquisition

Cost per acquisition (CPA) is a fundamental eCommerce KPI to understand as you track your paid media and marketing performance so that you can understand how to effectively grow your brand.

Cost per acquisition is calculated by dividing total/variable marketing spend (over a certain time period) by the number of new customers who have placed an order at your store (in the same time period). Here’s a visual:

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For even more information about cost per acquisition (and related metrics), head over here.

Video Transcript

What is going on, all my eComm people? We are back for another Data Snacks. Today, we’re going to be talking about cost per acquisition (CPA).

This is a fundamental KPI to understand as you’re tracking your paid media and marketing performance to really understand how effectively you can grow your brand. How we calculate CPA is by dividing the total marketing spend by the number of new customers who have placed an order at your store.

Why cost per acquisition is super important is because it allows you to get really granular on how expensive it is to actually acquire a new customer: from your dedicated marketing budget, how much can you afford to continue to drive growth from your brand?.

As you continue to grow your business, and as customers get more expensive to acquire, you should expect your CPAs to rise.

What you want to do is track this over time, because there are many things you can do in there, and there are many other factors that will affect CPA price that are super important to understand.

Cost per acquisition is an essential KPI to track to understand how your marketing budget’s performing, where your profitability is likely going to be, and how quickly you can scale up your brand. If your CPAs are dropping, and you can afford to spend more money, that’s a great opportunity to go in and grow your brand faster.

Special thanks to our friends at Daasity for their insights on this topic.

About the author

Steve Hutt

Steve has entrepreneurship in his DNA, starting in the early days of online commerce when he achieved Power Seller status through his eBay store. This propelled him to become a co-founder of VisionPros.com, a contact lens and eyewear retailer. With a successful exit from his startup, he embarked on his next journey into agency work in e-commerce and digital strategy.

Currently, Steve is a Senior Merchant Success Manager at Shopify Plus, where he helps identify, navigate, and accelerate growth in the complex world of commerce.

To maintain his competitive edge, Steve also hosts the eCommerce Fastlane Podcast and Shopify Founder Stories, a top-rated twice-weekly podcast where he interviews Shopify Partners and subject matter experts who share the latest marketing strategy, tactics, platforms, and must-have apps, to help Shopify brands improve efficiencies, grow revenue, profit, and lifetime customer loyalty.

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