{"id":4385353,"date":"2013-04-11T08:14:40","date_gmt":"2013-04-11T06:14:40","guid":{"rendered":"https:\/\/www.deptagency.com\/insight\/maximize-profit-with-incremental-cpa-analysis\/"},"modified":"2025-12-08T13:48:13","modified_gmt":"2025-12-08T11:48:13","slug":"maximize-profit-with-incremental-cpa-analysis","status":"publish","type":"article","link":"https:\/\/www.deptagency.com\/en-in\/insight\/maximize-profit-with-incremental-cpa-analysis\/","title":{"rendered":"Maximize profit with incremental CPA analysis"},"content":{"rendered":"
\n\t\n\t<\/svg>\n\t\t\t\n\t\t\tBack to all articles\t\t<\/span>\n\t\n<\/button>\n\t\tMaximize profit with incremental CPA analysis\t<\/h1>\n\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t<\/picture>\n\t\n\t<\/div>
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\n\t\tFeliks Malts\t\t
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\n\t\t\t\t\t11 April 2013\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t<\/div>\n<\/div>\n\n
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\n\t\tChoosing goals and targets are some of the most fundamental decisions in paid search.\u00a0 Unfortunately, they are often chosen somewhat arbitrarily and rarely re-evaluated.

Many traditional advertisers will often set CPA targets based on product revenue and margins alone, without taking incremental CPA and diminishing returns on profit into account. Let\u2019s consider the following example:

An advertiser with a $100 product and 25% margins has $75 in profit per conversion. He or she wants search to be a profitable channel and decides on a $50 CPA target with the goal of maximizing conversion volume at this CPA. While ultimately profitable, the problem with this approach is that the advertiser in question is optimizing towards conversion volume at a static CPA target, rather than a level of profitability.

An alternative advanced search strategy uses the concept of \u2018incremental CPA.\u2019\u00a0 To break it down simply, additional conversions gained through bid increases come with higher and higher CPAs<\/b> . It is somewhat intuitive but often overlooked when CPA targets are decided. How Incremental CPA Works Let\u2019s take a look at performance by rank for a set of queries with similar behavior in our example account. For the sake of simplicity, conversion rates have been standardized. \u201cProfit\u201d = (Conversions*$75)-(Cost)

If we\u2019re looking to maximize profit, the incremental CPA should be no greater than the break-even on post-margin profit.\t<\/p><\/div><\/div>\n\t\t\t<\/div>\n\t\t\t<\/div>\n\n\t\n\t