How to determine a target CPA?

[alankingc]

When working with PPC campaigns, you would be given a target CPA to archieve. I have read many articles but found 2 variations.

One says a target CPA is basically your gross profit margin multiplies by the percentage of your spending budget then multiplies by your conversion rate.

The other one says a target CPA is the CPA at which you maximize your profitability and is determined by trials and errors and playing with different CPC variables to find the optimal CPA.

I need a solid answer because these 2 methods are completely different, perferbaly from someone working in the field.

[Jake]

In internet advertising Cost Per Action is simply the advertising cost for each desired user action, which may be a purchase or a loan application.

Using 50 cent PPC ads with a sales page with a 1% conversion rate would give a $50 CPA.

Advertisers with an established record can get CPA based Google ads, which turns over the ad optimization process to Google. (of course a tracking system that reports conversions to Google is essential for this)

https://support.google.com/adwords/answer/2472713?hl=en