Back to Glossary
Budget
Marginal CPA
The cost of acquiring one additional customer at the current spend level. Different from average CPA because it reflects the cost of the next conversion, not the average of all conversions. As you increase spend, marginal CPA rises due to diminishing returns. The optimal spend level is where marginal CPA equals your target CPA or where marginal CPA across channels is equalized. This is the single most useful metric for budget allocation.
Why it matters
It is the number that should drive the next dollar, and it is always worse than average CPA, which is why average CPA over-funds a saturating channel.
In practice
Estimate it from recent spend steps rather than the account lifetime. Marginal cost at today's spend level is what you are actually paying.
Related terms