How to Determine Cost Per Acquisition (CPA) in Healthcare

Editor's Note: This blog was published prior to the transition to WebMD Ignite.

Cost per acquisition, also known as CPA, measures the cost of acquiring a customer. Depending on the organization, we see the exact definition of “acquiring” a patient fluctuate. For some hospitals, it’s when a patient schedules an appointment. For other hospitals, it’s when they arrive for treatment.

When marketers track cost per acquisition, they are taking the first steps to track true marketing performance and implement the change management to understand and socialize return-on-marketing-investment (ROI) – in particular, total marketing spend over total front-end conversions.

Defining CPA

CPA is a sales- and leads-based measurement, differentiating it from CPM (cost-per-impression) and PPC (pay-per-click). While CPM and PPC are based on eyeballs and traffic, CPA is based on specific lead generation actions. As a result, some organizations use CPA as a measure of whether they are efficiently spending their marketing budget.

CPA’s usefulness is on par with ROI. However, these two terms should not be used interchangeably. CPA is distinct from ROI because it is often used as an early leading indicator of long-term campaign success and marketing efficiency. This metric guides ongoing campaign optimization to consistently lower the cost to acquire, while reducing wasted spend and refining messages and channel tactics for improved conversion in the future.

Why Is Cost per Acquisition Important?

Defining your key performance metrics when it comes to acquisition is an essential part of any health organization's overall strategy for growth. Some or the reasons why CPA is an important metrics to look at include:

1. Financial Efficiency: CPA directly relates to how efficiently a company is acquiring customers. By understanding how much it costs to acquire a customer, businesses can evaluate whether their marketing and sales efforts are generating a satisfactory return on investment (ROI). Lower CPA indicates better efficiency and profitability.
2. Budget Allocation: Knowing the CPA helps businesses allocate their marketing budgets effectively. If certain channels or campaigns have a lower CPA and higher conversion rates, more resources can be allocated to those channels to maximize ROI
3. Performance Evaluation: CPA provides a clear benchmark for evaluating the performance of different marketing campaigns, channels, or even sales teams. It allows businesses to compare the effectiveness of various strategies and make data-driven decisions about where to invest resources
4. Optimization: Tracking CPA over time helps in optimizing marketing campaigns. By identifying which campaigns are driving the lowest CPA, businesses can replicate successful strategies and adjust underperforming ones to improve overall efficiency
5. Profitability: Ultimately, CPA directly impacts profitability. A high CPA means that acquiring each customer is expensive, which can erode profits. Monitoring and optimizing CPA helps businesses ensure that their customer acquisition costs are sustainable and aligned with their revenue goals.