Break-even CPA (cost per acquisition)
Break-even CPA is the most a store can pay in advertising for one order before that order starts losing money.
How it works
Once the cost of goods is paid, each order leaves the store some profit before advertising. Break-even CPA equals that sum, so it is the ceiling on what one order may cost in ads. Below the ceiling, the ads add profit; above it, each such order loses money. It is the same line as break-even ROAS, only expressed per order.
The ceiling grows with average order value and margin, so one store has different ceilings in different categories. If delivery, payment fees and returns also come out of each order, count the ceiling from contribution margin, and it drops. The guide to cost per acquisition shows how to work it out.
There is no single benchmark: it depends on order value, margin and the costs a store counts.
Formula
Average order value × margin (as a share of revenue)
Example
Example store, not client data.
The tableware shop has an average order value of 600 and keeps 35% of revenue after the cost of goods. Break-even CPA = 600 × 0.35 = 210. Its actual cost per conversion is 40,000 of spend ÷ 300 orders = 133, so each order leaves about 77 after advertising. Expressed as ROAS, the same line is 600 ÷ 210 = 2.86.
Not to be confused with
| Term | How it differs |
|---|---|
| Cost per conversion | What an order actually cost over a period. Break-even CPA is the ceiling it is compared with. |
| Target CPA | The price per conversion you give Google’s bidding. A target equal to break-even CPA aims at zero profit from the ads. |
| Customer acquisition cost | Spend per new customer. Break-even CPA counts any order, repeat orders included. |
Right and wrong readings
- Wrong: “An order of 600 can cost up to 600 in ads.” Right: the cost of goods comes out of the 600 first, so at a 35% margin the ceiling is 210.
- Wrong: “Cost per conversion is 133 against a ceiling of 210, so every product pays off.” Right: 133 is an average across 300 orders. A category whose orders average 300, at the same margin, has a ceiling of 300 × 0.35 = 105, below that average of 133.