How to Calculate Cost Per Conversion: Formula & Units

Instructor: Artem Cheprasov
In this lesson you will understand the metrics commonly used in marketing known as cost per conversion. You will learn the concepts behind this metrics and use formula to calculate cost per conversion along with an example.

Acquiring a Customer

One of the most important metrics you can have as a company is the amount of money you're paying to acquire something. This can be the cost to acquire the goods you're selling or the cost to acquire a customer. In other words, the cost to generate a sale of a product or service.

We're going to explore this concept a bit more in this lesson and then figure out how to calculate it.

What is Cost per Conversion?

So let's say you've got an online website. You sell products and services. You're also trying to build a brand and audience by getting more people to like and follow your social media presence and to sign up for a newsletter (and thus give you their email address).

As a result, you launch a marketing campaign. That marketing campaign will define what is and what isn't considered to be successful. Perhaps success means:

  • Selling a product
  • Selling a service
  • Having someone subscribe to your newsletter

When one of those predefined goals of advertisement are met, that is called a conversion. So the cost per conversion the total cost you've paid to achieve such a goal. Cost per conversion, also known as CPC, is sometimes also called cost per acquisition or cost per action.

Don't confuse CPC with cost per click, though. Someone might click on an ad but that might not lead to any conversion or action that you've defined as being successful or achieving the goal of the marketing campaign. Cost per click is a term that's most often used to refer to the amount you're charged for each click on your ad regardless of whether there is a conversion that follows or not.

Formula & Units

The formula for cost per conversion is quite simple.

CPC = (The total cost of advertising)/(the number of conversions)

CPC has units of currency.

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