CPA means cost per acquisition.
Cost per acquisition can also have multiple meanings. For example, are you measuring cost per lead, cost per sale or cost per email signup?
Different websites measure it differently, and it’s fine to measure any action, just as long as you’re consistent in your conversion tracking.
To give Google a number to target, you need to try and calculate a cost per acquisition.
For example, you’re an electrician, and each job you do averages about $300. You know that for each job you do, you need to get three leads from Google.
You work out that for each job you’re willing to spend $30 so the cost per lead will be $30 divided by 3 or $10. Then set your target CPA in Google at $10.
It is always important to ensure these numbers continue to make sense and part of managing your Google Ads account is to constantly check your data.
For example, if the number of leads per job increases, then your profitability will fall — if it takes four leads to get a job your cost per lead is now $40 instead of $30.
Further, if the number of leads per job falls, then the cost per job would fall. So, leave the target CPA at the original level to increase the volume of work.
For target CPA you need to have conversion tracking set up on your account correctly. When it is, it measures when a Google searcher clicks your ad, visits the conversion page and completes a conversion process (fills in a form, joins an email list or makes a purchase).
Even though Google asks for a number to target, you don’t have to have a conversion value in your tracking data. You do if you use the next method target ROAS.
Google is looking for a conversion and then divides the conversions by the total cost to get a cost per acquisition (conversion) compared to your target CPA.
Since the process is machine-driven, you continuously need conversions so Google can work out whether a Google searcher is likely to convert.
So, the bidding strategy is only as good as the data it gets. If you get little to no conversions each day, you will get poor results.
If you already get lots of conversions, then you should get a better outcome with this bidding strategy.
Further, if you do not have conversion tracking set up correctly, you could lead to overspending or underspending significantly. Poor data, poor results. Good data, great results.
If you’re starting out, don’t use this strategy until you have at least five conversions per day, every day and your conversion tracking code is set up correctly.