Cost per Acquisition (CPA)
Definition
Cost per acquisition, or CPA, is the total marketing spend divided by the number of customers actually won, measuring what it costs to acquire one paying customer.
What Cost per Acquisition (CPA) Means for Your Business
What it means
CPA is cost per lead's more honest cousin. Leads are cheap, but not every lead becomes a customer. CPA only counts the ones who actually paid you, which makes it the real return-on-marketing number.
Why it matters
CPA compared to customer lifetime value is the math that tells you whether marketing is profitable. A $300 CPA looks scary against a $500 first job but cheap against a $5,000 lifetime value.
How contractors use it
Shops track CPA by channel and segment. They compare it to CLV for each segment and adjust marketing mix to hit a healthy ratio, typically CPA no more than 25% of first-year customer revenue.
Real-World Example
A plumbing company ran a $280 CPA on residential service customers who generated an average $940 first-year revenue and $4,200 lifetime value. Healthy ratio, so they scaled spend 40% and added $520,000 in annual revenue.
Related Terms
Marketing Cost per Lead
Marketing cost per lead is the total marketing spend divided by the number of qualified inquiries it generated over the same period.
Customer Lifetime Value
Customer lifetime value, or CLV, is the total amount of revenue a customer is expected to generate for a business over the entire duration of the relationship.
Local Service Ads (LSA)
Local Service Ads are Google's pay-per-lead advertising format for local service businesses, where the ad shows at the top of search results and charges only when a qualified customer contacts the business.
Close Rate
Close rate is the percentage of presented estimates that result in a booked job or signed contract.
Customer Retention
Customer retention is the percentage of customers who continue doing business with a company over a defined time period, usually measured annually.
Put This Into Practice with Free Software
Kaldr Tech handles cost per acquisition (cpa) and everything else you need to run your shop. $0/month, 3.5% + 30¢ per transaction.