What is Cost Per Conversion? – Formula and Ways to Decrease Cost Per Conversion [With Examples]

What is cost per conversion?

The cost per conversion metric in Facebook ads measures the average cost for each conversion. This metric shows how much you spent to generate each conversion or lead on average.

Cost per conversion is sometimes also referred to as cost per acquisition (CPA).

How to calculate cost per conversion?

To calculate cost per conversion, divide the ‘amount spent’ on running ads by the ‘number of conversions’. You’ll get the answer in your preferred currency and not in percentage. 

Formula for calculating cost per conversion

Cost per conversion formula
Cost Per Conversion Formula

Real-life example of cost per conversion

Look at this example to understand cost per conversion:

Let’s say you run a Facebook ad campaign to promote your software. You spent $200 on the ad campaign and gained 10 conversions.

Then, your cost per conversion will be: 200/10 = $20

What’s an average cost per conversion? (benchmark)

The average cost per acquisition (CPA) on Facebook Ads is $19.68 across all industries. Ideally, your cost per conversion should not surpass your conversion value, as that would mean you're paying more for a conversion than it is worth.

Let’s say in the above example, if your software plan costs $15 and your cost per conversion is $20 then you’re probably doing something wrong as the cost of conversion is pretty close to the cost of the software.

Facebook Ads CPA benchmark
Facebook Ads CPA benchmark. Source: Wordstream

As you can see in the above infographic, Food & Drink advertisers find their customers on Facebook for a relatively low cost of $12.91.

However, some advertisers with longer purchasing cycles — like Home & Garden or Finance may have a higher CPA, with an average of $44.23 and $41.28 respectively.

CPA will vary for each industry as to what is an acceptable rate. So, make sure you know your industry rates before you set standards for your ad campaign.

Ways to decrease your cost per conversion

The more conversions you get, the lesser the cost per conversion will be. So, to decrease your cost per conversion, you need to focus on increasing your conversions.

Here are some ways to do so:

  • Leverage on videos: 89% of marketers agree that their video marketing efforts have delivered them good ROI. You should incorporate video ads in your Facebook ad campaign.
  • Optimize your landing page: The landing page is the first thing a user encounter after clicking your ad. You can roll out an A/B testing practice for your landing pages and analyze the results to see which one boosts conversion rate and can lower CPA in the long run.
  • Employ retargeting: Retargeting allows you to target a user who previously visited your site by showing them relevant ads. Since only 2% of leads convert on their first visit to your site, encouraging another visit becomes necessary.

Also Read: Related Metrics

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