What is cost per action?
Cost per action is a metric that measures the cost of each (conversion-related) action in Google Ads, based on the advertiser’s action goals. It is an online advertising payment model that allows to charge an advertiser only when prospective customers take certain actions.
The action may be any – a sale, link click, sign up, or form submit.
How to calculate cost per action?
To calculate cost per action, divide the ‘total cost of the ad’ by the ‘total number of actions’ received via Google Ads which might vary depending on your goals like – newsletter sign-up, form submissions registration, email submission, sale, etc.
Formula for calculating cost per action
Real-life example of cost per action
Let’s understand the cost per action with an example:
You own a software business and spent $1,000 on Google Ads. Your targeted actions were – email submission and free-trial signup. At the end of the ad campaign, you got 450 emails and 50 users signed up for a free trial version of your software.
So, your total number of actions is 500 (450 + 50).
Then, your cost per action will be: 1000/500 = $2
It means, you had to spend 2 dollars to win each action.
What’s an average cost per action? (benchmark)
The average cost per action in google ads across all industries is $48.96 for search and $75.51 for display.
The lowest cost per action across industries is autos, coming in at just around $33 per action. B2B, real estate, and tech companies, on the other hand, have average costs per action over $100.
Ways to reduce your cost per action
- Craft a highly converting landing page: With Google ads, you will direct your visitors to your landing page to complete an action. This is why, you need to ensure that you craft a highly converting landing page. Know about the 8 Essential Components of a Successful Landing Page
- Boost your quality score: Apart from optimizing your ad creative, break down your campaigns to create highly relevant keyword groups as it’ll not only improve the effectiveness of your ads but also boost clickthrough rates. Read: How to Improve Your Google Ads Quality Score
- Pause locations with higher CPA: Go to Adwords and analyze if some regions or cities in your ad campaign have no or very low conversion rates. Pause those cities with low conversion or too high CPA after analyzing data for at least 2-3 months.