It’s no secret that customer acquisition is getting more expensive. As CPMs (cost per thousand impressions) continue to rise, brands are facing a choice: either accept the growing CPAs (cost per acquisition) or make their campaigns work harder (and smarter) to drive better performance.

To keep CPAs in check, businesses should consider optimising their creative, leaning into platform best practices and testing multiple channels, or platforms, to ensure they are investing in the most cost-effective options.

Why Are Acquisition Costs Rising?

1. Media Inflation & Higher CPMs

As more and more advertisers compete for the same space, CPMs begin to climb. At the end of 2024, Meta’s CPM rose by 12% year-over-year, while TikTok’s ad costs are constantly increasing due to growing demand and ad spend on the platform.(1,2)

2. Increased Competition & Market Saturation

Brands are all bidding on the same audiences, which means fighting for their attention and therefore paying more to reach them. However, this ad fatigue means brands need more creative variations to maintain strong performance.

3. Targeting Shifts & Privacy Updates

Privacy updates in advertising means platforms like Meta & Google rely more on AI-driven bidding, reducing manual targeting options. Broad targeting is typically cheaper compared to lookalike ad spend but it also means less precise audience selection, so ad creative and funnel optimisation are even more critical.

What Is CPA and How It Impacts Your Media Strategy

CPA (Cost Per Acquisition) or CAC (Customer Acquisition Cost) is an umbrella term for the cost of acquiring a single customer when running paid media. Depending on your business goals, CPAs will vary:

• CPP (Cost Per Purchase) – how much you pay per completed transaction.

• CPR (Cost Per Registration) – the cost per user sign-up (often for lead gen, newsletters, free trials and subscriptions).

• CPL (Cost Per Lead) – the cost of generating a potential customer (often used in B2B or high-ticket industries).

If CPMs increase but your conversion rates stay the same, these costs will go up proportionally — unless your campaigns work harder.

How to Make Paid Social Work Harder

To combat rising CPAs you will need to make your paid social campaigns more efficient and cost-effective.

1. Leverage Audience Insights

Targeting the right audience is critical. Use first-party data, audience segmentation / lookalike audiences, and fine-tune your targeting strategies to reach the people who are most likely to convert.

2. Get Creative

With higher CPMs, your ad creative needs to be spot-on. Test various formats and messaging to see what resonates most with your audience. With each test, focus on improving both CTR (click through rate) and CR (conversion rate) and adjust creative accordingly.

3. Funnel Optimisation

Ensure your ads are leading users through the entire funnel, from awareness right down to conversion. Optimise landing pages, use remarketing strategies, and nurture leads via email to increase your chances of conversion.

4. Use Broader Targeting Strategies

Broader targeting strategies allow platforms like Meta and TikTok to optimise bidding and find more relevant users. Not only is it cheaper than specific audience targeting, you can reduce over-segmentation and let the algorithms find your ideal audience for you.

5. Explore Other Channels and Markets

Media costs vary by platform and region. If you're not market-specific, try exploring other regions, like Western Europe, where the media is cheaper with a similar spending power.(3) And remember, a balanced channel mix is important to keeping overall CPAs in check.

Final Thoughts

Making use of cost-effective advertising strategies is a great way to lower customer acquisition costs. Optimise your creative and test which variations work best for your brand, lean into platform best practices, and test multiple channels to ensure you are investing in the most cost-effective options.

If you’re looking to reduce your CPAs and optimise your paid social ads for better performance, get in touch for a free initial ads audit with our paid media strategist. We’ll provide actionable insights and real-world examples to help you maximise your strategies and the efficiency of your ad spend.


Sources
(1) Right Side Up
(2) EMarketer
(3) On Audience
(4) First Page Sage