PAID SEARCH | 13 Effective Ways to Reduce Your Google Ads CPA

Article by Justin Lugbill

Despite recent Google Ads changes, marketers can still improve acquisition efficiency. Justin Lugbill shares the latest best practices for optimizing CPA.

As Google Ads has matured, optimizing to decrease cost per acquisition (CPA) has gotten more complicated and left many marketers wondering:

What tools do I have to reduce Google Ads CPA?
What factors should I consider when optimizing CPA?

Despite loosening definitions on keyword matching, increased opaqueness (Search Terms report limitations; responsive ad reporting), and increased competition, marketers still have the needed controls to maximize their acquisition efficiency.

This article walks you through the tried-and-true best practices for optimizing CPA.

You’ll also find updated recommendations in light of newer changes to the Google Ads platform such as value rules, enhanced conversions, and modeled conversions.

Understanding CPA

First, what is CPA?

Google’s definition states that “Average cost per action (CPA) is calculated by dividing the total cost of conversions by the total number of conversions.”

“Conversion” will mean different things to different people.

For B2B, leads are generally considered a conversion.

For ecommerce clients, a sales transaction is typically the conversion.

For upper-funnel branding initiatives, engaged users may be the conversion that is used to back into a CPA.

Prospective customers taking some action of value is the common thread that holds the above together.

What’s A Good Cost Per Action?

I’m not shy in verbalizing my distaste for using benchmarks to measure success. I get the appeal of a hard number to serve as a threshold to answer whether or not digital marketing efforts are performing.

However, my 15 years of direct account management experience has taught me that there are too many nuances for a black-and-white question like, “What’s a good cost per action?”

The foundation of a good cost per action lies in the details of how valuable that action is, and the ROAS you want to hit. To answer that question, you need to work backward.

Mature organizations know the value of their customers and can tell you the customer lifetime value (LTV) for the segments that matter most for their business.

Companies frequently prioritize LTV for new and repeat customers for each core segment the business markets to (e.g., small business, mid-market, enterprise).

Once you have your LTV, you can calculate each action’s estimated monetary value (e.g., a lead) by combining it with the conversion rate for each funnel stage.

From here, you can add a multiplier to factor in the desired level of efficiency (or scale) you are after.