📈Analytics & Metrics 📚 Part of learning path

Cost Per Acquisition (CPA)

Average cost to acquire one new customer through marketing efforts

Definition

Cost Per Acquisition (CPA), also called Customer Acquisition Cost (CAC), is the total marketing and sales cost divided by the number of new customers acquired in a given period. Formula: CPA = (Total Marketing Spend + Sales Costs) ÷ New Customers Acquired. This metric reveals how efficiently you're converting marketing investment into customers. A $500 CPA means it costs $500 on average to acquire each new customer. CPA must be significantly lower than Customer Lifetime Value (LTV) for sustainable business growth. The ideal LTV:CAC ratio is 3:1 or higher. Reducing CPA involves improving conversion rates, targeting better qualified audiences, and optimizing marketing channels.

Real-World Example

A B2B software company spends $50,000 on marketing and $30,000 on sales in Q1, acquiring 80 new customers. CPA = ($50,000 + $30,000) ÷ 80 = $1,000 per customer. With average customer lifetime value of $12,000, their LTV:CAC ratio is 12:1—highly profitable unit economics.