Understanding CPA, MER and Cost Per Purchase:
A Smarter Way to Measure Your Marketing Performance
If you're running Meta Ads, Google Ads, or any kind of digital marketing, you've likely come across terms like CPA, MER, and Cost Per Purchase. But what do they actually mean, and how should you use them to make informed, strategic decisions?
Let’s break it down.
What is CPA?
CPA stands for Cost Per Acquisition. This refers specifically to how much it costs to acquire a new customer — someone who hasn't previously purchased from or interacted with your business in a meaningful way.
The formula is straightforward:
CPA = Total Ad Spend ÷ Number of New Customers
For example, if you spend £10,000 on Meta Ads and acquire 500 new customers, your CPA would be £20.
The important distinction here is the focus on new customers. This makes CPA different from other performance metrics like Cost Per Purchase, which doesn’t differentiate between new and returning customers.
CPA vs Cost Per Purchase vs MER
To clarify the differences between these commonly used metrics, here's a comparison:
MER (sometimes referred to as Marketing Expense to Revenue ratio) gives a broader perspective. It shows how efficient your overall marketing spend is relative to the total revenue generated — whether from new or repeat customers.
In simple terms: CPA is a focused metric, while MER gives you the full view of how well your entire marketing strategy is performing.
Why CPA Matters
Many advertisers default to focusing on ROAS (Return on Ad Spend), which measures how much revenue you generate for every pound spent. While ROAS is important, it doesn’t tell you whether you're acquiring new customers — which is key to long-term business growth.
CPA is particularly valuable because it gives insight into:
Your ability to grow your customer base
The profitability of your campaigns
How your spend aligns with your customer lifetime value
Knowing your CPA allows you to make decisions that support sustainable growth, rather than chasing short-term wins.
Aligning CPA with Your Business Goals
It’s important to define what a good CPA looks like for your business. That figure will depend on your profit margins and your Customer Lifetime Value (LTV).
For instance, if your average customer spends £200 over the course of their relationship with your brand, it may make sense to spend £20–£40 to acquire them. That’s a profitable exchange — especially when you consider that it’s significantly cheaper to sell to an existing customer than to acquire a new one.
Customer acquisition is essential for growth. But what matters just as much is what you do after someone becomes a customer. CPA is only the start of the journey — retention, upselling, and long-term engagement are where profitability really scales.
Final Thoughts
While CPA, Cost Per Purchase, and MER all provide valuable insights, they each tell a different part of the story. A healthy strategy uses all three.
CPA helps you measure how efficiently you're acquiring new customers. MER gives you a broad overview of how your marketing spend supports overall revenue. And Cost Per Purchase tells you how cost-effective your sales are, regardless of the buyer’s history.
For long-term business health, it’s crucial to look beyond just revenue and ROAS. Your CPA should be aligned with your customer lifetime value, your profit margins, and your long-term growth strategy.
In short, smart marketing isn’t just about getting sales — it’s about understanding who you’re selling to, how much they cost to acquire, and how valuable they are over time.
