What Target Cost-Per-Action Is and How to Properly Execute It With Google Ads 

Operating on an auction-based platform, Google advertisers can bid on various keywords that a potential customer is searching for. In order to achieve this, advertisers can choose various bidding strategies including manual and automated bidding. As AI and Machine Learning become increasingly more sophisticated, the reliance on automated bidding has grown exponentially over the past several years. 

With automated bidding, advertisers can easily manage their campaigns and let AI/Machine Learning automatically bid for them, eliminating the process of manually setting the proper bids for these keywords. Among these automated bidding strategies, Target Cost-Per-Action (Target CPA) has become one of the most popular strategies for optimizing the performance of Google Ads campaigns. 

What Is Target Cost-Per-Action (Target CPA)? 

Target Cost-Per-Action (Target CPA), or sometimes referred to as target cost-per-acquisition, is a type of smart bidding strategy that automates bidding adjustments through your Google ads campaigns. Advertisers can set this target as a signal to Google to acquire conversions and use its machine learning to acquire those conversions at the cost that was set. 

The true benefit of implementing a target CPA is that it uses machine learning to bid automatically, using Google’s algorithms and endless amounts of data to bid effectively. With Target CPA Google can maximize conversions while keeping the cost per conversion as close to the target CPA as possible while not going over your daily budget. 

Although setting a target CPA can be effective, it is not a solution that you simply implement once and forget about it. While Google does most of the work, there are many factors that are always changing. These include market fluctuations, competition, business objectives, etc. Setting a target CPA requires continuous review and adjustment based on the data and your unique business goals. 

How To Determine an Appropriate Target CPA

As with any marketing strategy, you want to set realistic expectations and goals. To start, take a look at specific metrics such as your historical conversion data, but also your current cost-per-conversion, cost-per-click, and conversions. These metrics can provide a baseline target CPA to start with, particularly with cost-per-conversion. There are several methods and theories on this, however, we recommend starting with your most current cost-per-conversion looking at the past 2-4 weeks. This “learning phase” will allow Google’s algorithm to optimize and fine-tune the campaign. It’s important to allow Google some time in order to optimize for this goal and not adjust the target CPA too often. Google is able to look at real-time signals such as device type, browser, browsing history, and location to find potential users who are more likely to convert. Although there is no “perfect” time frame or cadence adjusting target CPA, it’s advisable to wait until Google has gotten close enough to the target and then reassess. Then you can adjust as needed. 

Understanding the average customer acquisition cost and profitability are important factors as well when deciding on an effective and realistic target CPA. For example, an ecommerce business that sells high-end clothing averaging $200 an order and the profit margin is 30%. Setting a target CPA of $100-$150 would not make sense because that does not allow for much profit. Instead, setting a target CPA of $30-$40 might make more sense allowing for profitability and future customer value. Although the initial target CPA might have to be set higher to allow Google to be competitive enough at the time of bidding, the goal would be to reduce the target CPA over time if it aligns with your business and advertising goals. 

Having a strong industry insight can also be helpful as well. If the average target CPA in a particular industry is X, it can provide a starting point for an initial target. According to WordStream, the average Cost Per Lead (Cost-Per-Conversion) across all industries within Google Ads is $66.69. However, it’s important to look at a specific industry as the cost per conversion can vary dramatically depending on the business and industry. For example, Wordstream explains that the average cost-per-conversion for the animal and pets industry is $34.81 while the industry average for legal services is $144.03. This is why it is important to identify the correct average industry cost-per-conversion and that a business is comparing “apples to apples” when deciding on a target CPA.

Remember, setting a target CPA is not a one time, one adjustment solution. This requires ongoing and continuous adjusting based on the data collected and business objectives. 

Best Practices of Implementing Target CPA

Implementing a target CPA bidding strategy requires attention to detail and the correct campaign setup. It’s important to note that not all campaign types allow for a target CPA so it is essential to choose the correct campaign type. Here are a few best practices for successfully implementing a target CPA:

1. Choose the Right Campaign Type: As mentioned, target CPA is not readily available for all campaign types and usually works best with campaign types, such as Search, Display, and Video campaigns. Make sure that the campaign type supports Target CPA and that it aligns with the overall business objective.

2. Set Appropriate Conversion Actions: Remember that target CPA is directly correlated with conversions. Setting up and clearly defining conversions is perhaps the most important aspect of measuring a campaign’s success. Such conversions can include Newsletter sign-ups, phone calls, purchases, link clicks, etc. Once these conversions are defined, make sure that conversion tracking is as accurate as possible whether those conversions are tracked using Google Tag Manager, 3rd party tracking, custom tracking, etc. Having conversion tracking in place will make it very easy for you to see if you’re hitting your conversion goals.

3. Create Specific Ad Groups: Target CPA must be activated on the campaign level; however, once this is activated on the campaign level, a specific target CPA can be set for each individual ad group. This is why it is recommended to have different ad groups for different products or services that a business provides whenever possible. Having one target CPA for all ad groups is generally not recommended as different ad groups will have different metrics such as cost/conv, thus the need for different target CPA’s.

Important Metrics and KPIs for Target CPA Campaigns

We know that proper campaign setup is the cornerstone for success when it comes to this bid strategy. However, once this is successfully implemented, it is important to know which metrics and KPIs to track. Although there are several metrics to track, there are a few metrics that are essential for measuring success.

1. Conversions: This one should come as no surprise as this metric is what Google is going to optimize for. Remember when a target CPA is implemented, it is telling Google that this is the target cost a business is willing to pay per conversion. 

2. Cost Per Conversion: The cost per conversion is essentially the average cost it takes to acquire each conversion. It’s important to carefully watch this metric as this will measure how close (or far) the campaign is from the target CPA. Remember to stay patient and don’t adjust the target CPA too often. It will take Google some time to get to the desired target so patience is key. 

3. Conversion Rate: This metric measures the percentage of clicks that result in conversions. According to Wordstream, the average national Conversion rate in 2024 is 6.69%; however, this is going to vary widely based on industry. The goal is to get a high conversion rate but it is important to know what the standard is within a specific industry. Business A cannot compare itself to Business B when they are in two completely different industries. Remember to compare “apples to apples”. 

At Metapixel, we recently noticed that one of our client accounts was experiencing a significant decrease in conversions and it was clear that the budget was not being allocated properly. We then implemented a target CPA based on the strategy outlined, and they saw more than a 25% increase in conversions over the next few months. This emphasizes the importance of consistently looking at the data that is provided and making adjustments accordingly.

An Alternative to Target CPA for Ecommerce Businesses

It’s important to note that Target CPA is not recommended for ecommerce businesses. Instead, ecommerce businesses should utilize Target ROAS. This is because Target CPA requires advertisers to use the “maximize conversions” bidding strategy, which is useful for maximizing the total number of leads generated from ads. 

Ecommerce businesses on the other hand can track real sales revenue through the “conversion value” metric. Since there is a cost associated with each product, ecommerce businesses will need to make sure they are not cutting into their profits with their advertising budget. Therefore, they should track their return on ad spend (ROAS), and utilize the Target ROAS bidding strategy. 

Target ROAS Is an automated bidding strategy that adjusts bids based on the specific ROAS that you wish to achieve.

While ROAS as a metric simply measures the return you received from your advertising efforts, Target ROAS as a bidding strategy utilizes machine learning to analyze historical performance data and user signals, to optimize bids based on the desired Target ROAS. However, It’s important to note that Target ROAS bidding should be determined by conversion data and the realistic needs of your business. For instance, simply setting your Target ROAS to 1000% doesn’t equal actual results. Much like target CPA, this should be carefully implemented and continuously adjusted over time. If your average ROAS is 250%, it is unlikely that your campaign will reach 1000% ROAS without proper optimization and potentially increasing your budget spend as well. 

Here are a few important metrics that are crucial for measuring success for an ecommerce business.  

1. Conversion value: Conversion Value is the metric that shows the total value (or revenue) accrued by your campaigns. It’s important to note that this metric is particularly useful for ecommerce businesses and shopping campaigns. The reason being is that with businesses, such as a law firm, looking to acquire leads rather than direct purchases, it can be difficult to assign a specific value of a lead because leads don’t always equal a specific value. This metric allows you to track the monetary value of your campaigns which is helpful to calculate ROAS. 

2. Return on Ad Spend (ROAS): ROAS is a metric that takes the revenue generated and is divided by the cost of advertising. Multiply that by 100 and you will get your ROAS. This is important because it shows you how cost-effective your ads are based on revenue generated vs. the cost of advertising. 

More Than Achieving a Specific Cost Per Action

It’s important to remember that target CPA is not a “one-size-fits-all” solution. Approach target CPA strategy with the intent of long-term success and making data-driven decisions.  

Ultimately, implementing a target CPA is much more than just achieving a specific cost per action, It’s about driving meaningful business results based on the objectives. As you continue to utilize a target CPA it will become easier to navigate and ultimately become more effective over time. Remember that success often comes from a combination of expertise, creative thinking, and a well-rounded understanding of your audience. It is important to always be patient and listen to the data to improve your return on investment (ROI). If you’re looking for help on this, contact us! We’re a PPC agency that can help.

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