What is cost per sale (pay per sale)?

Why CPS matters in modern marketing

While cost per sale can be applied to all advertising campaigns, it is most effective and accurate in measuring digital advertising since the ad's performance can be accounted for in small details like clicks and pageviews, using content analytics tools, such as Google Analytics.

In a digital campaign, the consumer clicks through an advertisement to the business's website to complete the transaction. Once the customer reaches the intended landing page, a pixel is attached that tracks that specific user through to checkout. This provides for a much more accurate and precise CPS calculation than traditional media ad campaigns. Those campaigns often cannot track the sales specifically tied to the campaign. If sales prompted by multiple or aggregate efforts are included in the CPS calculation, results might be difficult to discern or misleading with respect to source attribution.

CPS helps advertisers:

• Evaluate return on ad spend (ROAS).
• Optimize marketing channels and creatives.
• Make data-driven budgeting decisions.
• Lower customer acquisition costs (CAC).

By measuring how much each sale costs, companies can scale what works and cut what doesn't -- increasing revenue without overspending on inefficient strategies.

How to calculate the cost per sale

The formula for calculating CPS is:

CPS = Total advertising cost / Number of sales generated

To ensure accurate reporting, all campaign-related expenses must be included in the total cost, including media spend, technology fees, commissions, and employee time.

Example:

If a company spends $10,000 on a paid search campaign and it generates 250 sales, the CPS is:

$10,000 / 250 = $40 per sale

Factors that influence CPS

While the formula is straightforward, a complete understanding of CPS requires a breakdown of indirect and operational costs. Key factors include the following:

1. Lead-to-prospect conversion costs

This includes labor, time, and tools used to qualify leads. Employee compensation, CRM software, and analytics tools all contribute to this cost.

2. Prospect-to-customer conversion

These are expenses related to turning a prospect into a paying customer, such as sales outreach, product demos, or proposal development.

3. Website and landing page expenses

This is the cost to build, host, and optimize digital properties, including web development, testing or experimentation tools, and user experience improvements.

4. Customer service and support

Effective customer service and support improve retention and reduce refund rates, ultimately improving the profitability of each sale. These disciplines are not the same; both matter.

5. Commissions and affiliate payouts

Commission structures, especially in affiliate or partner programs, significantly affect CPS. Higher commissions often attract top performers but raise overall costs.

Benefits of using CPS as a performance metric

CPS provides a clear measure of efficiency. Benefits include the following:

• Better budget allocation. Know which campaigns drive profitable results.
• Increased transparency. Easily compare channels (e.g., email vs. search vs. social).
• Scalability. Scale campaigns with a predictable cost model.
• Continuous optimization. Identify which tactics deliver the best sales-to-spend ratio.

The CPS calculation process yields numbers that can be easily used to identify areas where sales productivity can be improved strategically. Because optimizing productivity is an ongoing process, CPS should be calculated continuously to help companies discover different ways to lower costs while improving results.

CPS vs. CPA: What's the difference?

Cost per acquisition (CPA) includes all types of customer actions, not just purchases. These actions could include the following:

• Email sign-ups.
• App downloads.
• Webinar registrations.

CPS, in contrast, only counts completed sales. While CPA is broader and useful in early-funnel campaign analysis, CPS is better for bottom-of-funnel strategies focused on revenue. When used together, CPA and CPS can reveal clearly a campaign's performance.

Limitations of CPS

While CPS is valuable, it's not without challenges:

• Attribution delays. Some customers might purchase days or weeks after clicking an ad, skewing CPS calculations if attribution windows are too short.
• Multitouch journeys. Customers often interact with multiple channels before converting, making single-touch CPS attribution misleading.
• Offline sales. If a campaign drives in-store purchases, tracking becomes harder without an integrated POS or loyalty program.

To mitigate this, organizations with sufficient resources can use multitouch attribution (MTA) models or integrate customer data platforms (CDPs) to unify online and offline touchpoints.

How to reduce CPS

To lower the CPS while increasing volume, consider these best practices:

• A/B testing. Test creatives, messaging, and CTAs regularly.
• Sales training. Improve conversion rates with highly skilled reps
• Retargeting. Re-engage warm leads at a lower cost.
• Email automation. Drive repeat sales with lifecycle campaigns.
• Search engine optimization. Generate organic traffic with no per-click fees.

Future trends in CPS tracking

Modern advertisers are moving beyond last-click attribution. With the rise of AI-powered marketing tools and cookie-less tracking, CPS is increasingly tied to:

• AI-driven attribution models.
• First-party data strategies.
• Offline conversion imports in Google Ads and Meta Ads.
• Real-time personalization for conversion rate optimization, also known as CRO.

Companies are also combining CPS data with customer lifetime value, or CLV, to evaluate true long-term profitability. That's important for subscription and software-as-a-service models.

Learn how companies can engage their users with these real-world multichannel marketing examples.

Explore the differences between customer retention vs. acquisition and read more about test marketing.