Are you looking to run an online advertising campaign for your company’s products or services? If so, one of your main concerns is likely return on investment (ROI), isn’t it? Turning visitor clicks into sales is no easy task. However, just because it’s not easy doesn’t mean it’s impossible. It all depends on the marketing business model you use for your online ads. Rather than focusing on a potential sale based on the number of clicks, why not focus on tangible results? This is what’s known as Cost Per Action, or CPA. The question is: What is Cost Per Action?
Cost Per Action (CPA)—what is it?
Cost Per Action (CPA) is an online affiliate marketing business model that pays an “affiliate” a commission based on the action taken by a visitor on the platform. In other words, it is a billing method that allows an advertiser to pay an affiliate based on the number of results generated by the advertising campaign. It is a unit of measurement for acquisition cost in the same category as CPC or CPM. The difference is that CPA is based on a concrete outcome: the conversion. Hence its other name: Cost Per Acquisition (
). While CPA is now commonly associated with web marketing, it’s important to note that this billing method dates back to well before the advent of the internet. In fact, CPA marketing was first used for telephone sales campaigns. Sales representatives in charge of promotions are paid based on the number of actions generated.
The term “action” is generally associated with a “completed sale.” However, in the digital realm, note that depending on the advertising campaign’s objective, an action can mean watching a video, signing up on a website, requesting a quote, downloading an app, and so on. With the rise of digital marketing and the widespread use of sponsored links, CPA has become an indispensable tool for optimizing companies’ return on investment.
How does CPA marketing work?
To do CPA marketing, you need to understand the following three key players: the advertiser, the affiliate, and the CPA network.
Key Players in CPA Marketing
The term “advertiser” refers to a company that wants to promote a product or service through an online advertising campaign. Sales and service requests are the ultimate goal of any business. However, an advertiser may have other objectives in mind, such as generating leads, driving quality traffic, or boosting conversions.
The term “affiliate” or “publisher” refers to the person in charge of the online advertising campaign. This person promotes the product or service using various techniques to drive traffic to the page specified by the advertiser. In the digital age, all kinds of affiliates have emerged in the market. They aren’t necessarily professionals, but they must have knowledge in the relevant field (niche). Generally, affiliates are bloggers.
A CPA network is a platform that acts as an intermediary between the advertiser and the affiliate. It is through this platform that advertisers find the affiliates they need. It’s a win-win situation for both sides. For the advertiser, it’s a way to promote products at a lower cost. For the affiliate, it’s an easy way to earn money.
Choosing the Right Affiliate
An affiliate isn’t necessarily a professional, but that doesn’t mean just anyone can promote a business. It’s essential for an advertiser to choose an affiliate who meets certain selection criteria.
Among these criteria is performance. Note that performance does not necessarily refer to the number of views, but rather to the number of actions or conversions generated. It’s important to know that some affiliates inflate their traffic numbers, which results in a high number of views but a low conversion rate.
Next, the affiliate in question must operate in the advertiser’s industry or niche. For example, for a company that manufactures dietary supplements, the affiliate must offer content relevant to that product. In this context, a blogger who provides nutrition and health advice is the best fit.
The safest way to work with a high-quality affiliate is through a CPA network. Most affiliate platforms have strict requirements for their members. For instance, affiliates may be required to meet a minimum traffic threshold, in addition to other criteria. To prevent fraud, some networks require affiliates to undergo an interview with an “affiliate manager.”
What is the value of the CPA in digital marketing?
CPA marketing offers many benefits for both advertisers and affiliates.
Payment Based on Sales
Whether online or offline, advertising campaigns are expensive to run. It is therefore important for an advertiser to choose a marketing business model that delivers results commensurate with the investment. Fortunately, that is exactly what CPA offers. An advertiser doesn’t pay for traffic that doesn’t result in conversions. To avoid this, it’s essential to carefully select affiliates, prioritizing the highest-performing ones. Furthermore, to maximize the chances of conversions, it’s recommended to diversify your affiliate network. Here again, this is an advantage, as the market offers a wide variety of affiliates to choose from.
Very easy to set up
As a monetization strategy, CPA marketing is easy to set up. In practice, an advertiser needs two things to run a successful digital advertising campaign, starting with a website. This can be a showcase site or an e-commerce site. For the second element, the advertiser must join an advertiser network. Through this network, you gain access to a community that makes it easier to find support, particularly when searching for high-quality affiliates. For the affiliate, once the work is complete, all that’s left to do is wait for their payment, which is typically issued every two weeks or at the end of each month.
Significant Return on Investment
An advertising campaign is designed to drive action. If there’s no action, there’s no return on investment. To avoid this, CPA offers a solution based on tangible results. According to statistics, internet users are more likely to spend more money if a product or service is offered by an affiliate. In terms of numbers, affiliate marketing generates approximately 16% of online revenue. This means that by opting for CPA marketing, advertisers gain access to higher-quality traffic. Furthermore, across most traffic sources, the value for money is excellent.
Low-Risk Marketing
With other marketing business models, the risks can be high because the return on investment is uncertain. It’s important to understand that even if an affiliate has subscribers, this doesn’t guarantee that those leads will take action. Hiring an affiliate with an ineffective billing method means wasting money unnecessarily. By opting for CPA marketing, advertisers avoid this risk with a customized rate. Furthermore, the way the affiliate markets the product or brand can be tracked using dedicated tools. This way, in addition to controlling costs, you can also closely monitor the marketing efforts.
Multi-faceted and wide-reaching marketing
CPA marketing is effective for promoting a company’s products and services. No matter what industry an advertiser operates in—such as technology, fashion, or others—CPA ensures successful marketing. In fact, product distribution increases as market reach expands. But keep in mind that its scope isn’t limited to just that. It’s not just about marketing, but also about expanding the brand’s reach. The company can easily convey a brand message, in a consistent manner, to a wide audience.
How do you implement CPA in digital marketing?
These days, there are countless ways to use affiliate marketing to promote a product, service, or brand.
The website
When it comes to digital marketing, the website remains, of course, the primary tool for promoting a brand and its products. To generate traffic, there are several steps an advertiser can take.
The first is to buy traffic through tools such as Google Ads and Facebook Ads. This solution is effective, but it’s important to pay close attention to the cost per acquisition. Indeed, the advertising cost must be low relative to the revenue generated. It is therefore an option that warrants careful consideration.
On the other hand, website affiliate marketing is an effective solution that can be implemented using various tools. An affiliate—particularly a blogger—can promote the advertiser using a landing page, a banner ad, a link to the offer, and so on. The key is to ensure that the chosen affiliate operates in a niche relevant to the industry.
The Media Buy
Still within the context of website affiliate marketing, there’s media buying. The concept is simple: the advertiser purchases what’s called an “advertisement” on a platform with high traffic. This is particularly common when an advertiser wants to promote a specific offer. The offer is displayed in a specific location on the website for a set period of time. This method is one of the oldest used in affiliate marketing. The most important thing with this method is to stay focused on return on investment.
The video
In recent years, videos have become the go-to method for affiliate marketing. It’s important to note that many affiliates have become true celebrities by creating video content online. Here, we’re not talking about bloggers, but “vloggers.” They primarily use YouTube to create video content.
In practice, to do affiliate marketing through video, the affiliate must mention the product or brand in their video and include a link in the description that directs viewers to the page specified by the advertiser. Alternatively, there are also videos on social media platforms, particularly Facebook. This type of video generally serves as a complement to the affiliate’s YouTube channel.
