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What is CPA (Cost Per Action)?

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Definition​

CPA is a number that shows how much advertising money it costs to acquire one customer. It stands for Cost Per Action or Cost Per Acquisition, and simply put, it tells you "how much did it cost to bring in one customer?"

Let me give you an example. A local pizza shop spent 100,000 won on Instagram ads, and 20 customers who saw the ad actually ordered pizza. The CPA is 100,000 won ÷ 20 people = 5,000 won. That means it cost 5,000 won in advertising per customer. If selling one pizza leaves a net profit of 8,000 won, then after spending 5,000 won you made 8,000 won, so that's 3,000 won profit per customer.

Why CPA matters is simple. No matter how many people see your ads, if few actually pay and purchase, it's useless. It's like having many people pass by your store but nobody comes in. CPA clearly shows "how many actual customers did we bring in with our advertising money?"

Characteristics​

  • Directly tied to real business - It measures real customers and real purchases, not views or clicks. It's the number business owners care about most
  • Good for comparison - If Facebook ads have a CPA of 30,000 won and Naver ads have 20,000 won, you immediately know Naver is more efficient
  • Shows profit and loss immediately - If CPA is lower than product profit, you're making money; if higher, you're losing money. The calculation is clear-cut
  • Helps find areas to improve - High CPA signals that you need to change your ads or adjust pricing
  • Constantly changes - CPA varies by season, day of week, and competitive situation. CPA goes up around Christmas and down on slow weekdays

How to Use​

To properly use CPA, you need to approach it step by step. Let's assume you're running an online clothing store.

Step 1: Set Goals First, you need to define what counts as a "conversion." For a clothing store, it would be "purchase completion," right? For a cafe, it could be "store visit" or "phone inquiry." Define it clearly.

Step 2: Create Tracking System How can you tell if someone who saw your ad actually made a purchase? If it's online, you can track using tools like Google Analytics or Facebook Pixel. If offline, you can ask "Where did you hear about us?" or use different coupon codes to verify.

Step 3: Calculate Current CPA If last month's Facebook ad spend was 2 million won and you got 100 actual purchasing customers, the CPA is 20,000 won. Organize this by channel. What's the CPA for Instagram, Naver, and Google each?

Step 4: Set Target CPA Say one piece of clothing is 50,000 won, and after subtracting cost of goods and shipping, the net profit is 20,000 won. Then if CPA is 20,000 won you break even, and it needs to be lower to make money. Usually, you set target CPA at 50-70% of net profit. In this case, around 10,000-14,000 won would be the target.

Step 5: Find Why CPA is High If CPA is higher than target, what's the problem? The ad itself might be bad, or the ad might be good but the product page is bad. If you get lots of ad clicks but few purchases? Fix the product page. If clicks themselves are low? Make the ad more attractive.

Step 6: Improve Landing Page This is the fastest way to lower CPA. Make people who click on your ad think "Oh, this is nice" and buy immediately. How? Make the title clear, show benefits prominently, add customer reviews, make buttons stand out, simplify forms, and speed up loading.

Step 7: Narrow Targeting If ads show to uninterested people, they'll click but not buy, only raising CPA. For example, if you're selling expensive suits, narrow it to "20-30s, office workers, fashion interest." Showing it to students or homemakers won't result in sales.

Step 8: Run Retargeting Ads Showing ads again to people who visited your website once is called retargeting. Since they already showed interest by visiting, CPA is 50-70% lower than regular ads. You must do this.

Step 9: A/B Test Test which is better between ad copy A and B. Run A this week, B next week, and see which has lower CPA. Keep improving this way and CPA will gradually decrease.

Step 10: Monitor Continuously CPA isn't fixed. You need to keep checking and adjusting. Look at data weekly, take action if CPA rises, and analyze why it dropped to do even better if it falls.

Examples​

Example 1: Local Chicken Shop Cheolsu runs a chicken shop. He spent 300,000 won on Naver Place ads and got 60 phone orders. CPA is 300,000 won ÷ 60 orders = 5,000 won. If selling one chicken gives about 12,000 won net profit, then spending 5,000 won to earn 12,000 won means 7,000 won profit per customer. Not bad, right? But when he narrowed ad hours to only 5-9pm and added a "10% off first order" coupon, orders increased to 90. CPA dropped to 3,333 won. He brought more customers with the same money.

Example 2: Online Course Younghee sells online yoga courses. She spent 2 million won on YouTube ads and 40 people bought the course. CPA is 50,000 won. The course costs 200,000 won with a net profit of 180,000 won (digital products have almost no cost of goods). Spending 50,000 won to make 180,000 won means 130,000 won profit per customer. Very good! So she increased advertising. But just increasing blindly can raise CPA, so she added a free sample lesson to the landing page for people to try. Then CPA dropped to 30,000 won.

Example 3: Mobile App Minsu made a meditation app. He spent 5 million won on Apple App Store ads and 5,000 people downloaded the app. Download CPA is 1,000 won. But it doesn't end there. Of the 5,000 downloads, 400 people started paid subscriptions. So actual paid customer CPA is 5 million won ÷ 400 people = 12,500 won. Monthly subscription is 9,900 won but they stay for an average of 8 months, so each customer earns 79,200 won. Spending 12,500 won to earn 79,200 won is great business! But the conversion rate from download to paid was low, so he improved the app's first screen to start meditation immediately. Then conversion rate increased and CPA dropped to around 5,000 won.

Example 4: Cosmetics Shopping Mall Sujin runs a cosmetics shopping mall. She spent 1 million won on Instagram ads and got 50 purchasing customers. CPA is 20,000 won. Average purchase is 60,000 won with 30,000 won net profit, so spending 20,000 won to earn 30,000 won means 10,000 won profit per customer. Not bad, but she wants to improve. So she showed "free shipping if you buy within 24 hours" ads again to people who added items to cart but didn't buy. This retargeting ad only cost 8,000 won CPA. With the same 1 million won, mixing regular ads (50 people) and retargeting ads (50 more) got a total of 100 customers.

Pros and Cons​

Pros​

  • Measures what really matters - It measures actual sales and actual customers, not views or likes, so it's the number business owners care about most
  • Shows profit and loss immediately - If CPA is lower than net profit you're making money, if higher you're losing. The calculation is clear-cut so decisions are easy
  • Easy to compare channels - Calculate CPA for Facebook, Google, and Instagram and you can see at a glance which is most efficient

Cons​

  • Not all customers are equal - Some customers spend 10,000 won and that's it, while others keep repurchasing and spend 1 million won. CPA doesn't show this difference. Even expensive CPA can be profitable if it brings good repeat customers
  • Only looks at first purchase - CPA can't tell the difference between customers who buy once and quit versus loyal customers who repurchase 10 times. Even if CPA is high at first, you might earn a lot from repurchases later
  • Doesn't show the process - CPA alone can't tell if high CPA is because the ad is bad, the product page is bad, or the price is too high. You need to look more closely

FAQ​

Q: What's a good CPA? A: A "good CPA" varies completely depending on product price and profit. There's no absolute standard. Generally, if CPA is below 30-50% of net product profit, it's fine. For example, if net profit is 100,000 won, CPA should be below 30-50,000 won. For products with high repurchase rates (subscription services, cosmetics), CPA similar to first purchase profit is okay because they'll keep buying. The most important thing is "is my business making money?"

Q: How do I quickly lower CPA? A: Three fastest methods. First, improve your product page. Make titles clear, show benefits prominently, add reviews, make buttons stand out, and CPA can drop by half. Second, run retargeting ads. Re-advertising to people who visited before lowers CPA by 50-70%. Third, stop showing ads to uninterested people. For expensive products, exclude search terms like "free" or "cheap." Just these three can lower CPA by 30-50%.

Q: Are CPA and CAC the same? A: Similar but slightly different. CPA is the cost per single conversion (purchase, signup, download, etc.). CAC (Customer Acquisition Cost) is specifically the total cost to acquire "one paying customer." For example, app download CPA and paid customer CAC are different. Also, CAC often includes not just ad costs but also marketing team salaries and tool costs. They're used similarly in practice, but technically CAC is a broader concept.

Q: Are there cases where high CPA is okay? A: Yes. First, when customers keep repurchasing. For subscription services or products like coffee that people buy repeatedly, even if initial CPA is high, you recover it later. Second, when first starting a new advertising channel. At first CPA is high due to lack of optimization, but it drops after 2-3 months. Think of it as a test period. Third, expensive products. For a 1 million won product, 100,000 won CPA is totally fine. The important thing is having a strategic reason. High CPA with no thought is a problem.