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Cost Per Action
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Cost per action (CPA), sometimes known as pay per action (PPA) and cost per
conversion, is an online advertising pricing model where the advertiser pays for
each specified action - for example, an impression, click, form submit (e.g.,
contact request, newsletter sign up, registration etc.), double opt-in or sale.
Direct response advertisers consider CPA the optimal way to buy online
advertising, as an advertiser only pays for the ad when the desired action has
occurred. The desired action to be performed is determined by the advertiser.
Radio and TV stations also sometimes offer unsold inventory on a cost per
action basis, but this form of advertising is most often referred to as "per
inquiry". Although less common, print media will also sometimes be sold on a
CPA basis.
CPA as "cost per acquisition"
CPA is sometimes referred to as "cost per acquisition", which has to do with the
fact that many CPA offers by advertisers are about acquiring something
(typically new customers by making sales).
Formula to calculate cost per acquisition
Cost per acquisition (CPA) is calculated as: cost divided by the number of
acquisitions. So for example, if one spends £100 on a campaign and gets 10
“acquisitions” this would give a cost per acquisition of £10.
Pay per lead
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Pay per lead (PPL) is a form of cost per action, with the “action” in this case
being the delivery of a lead. Online and Offline advertising payment model in
which fees are charged based solely on the delivery of leads.
In a pay per lead agreement, the advertiser only pays for leads delivered under
the terms of the agreement. No payment is made for leads that don't meet the
agreed upon criteria.
Leads may be delivered by phone under the pay per call model. Conversely,
leads may be delivered electronically, such as by email, SMS or a ping/post of
the data directly to a database. The information delivered may consist of as little
as an email address, or it may involve a detailed profile including multiple
contact points and the answers to qualification questions.
There are numerous risks associated with any Pay Per Lead campaign, including
the potential for fraudulent activity by incentivized marketing partners. Some
fraudulent leads are easy to spot. Nonetheless, it is advisable to make a regular
audit of the results.
Differences between CPA and CPL advertising
In cost per lead campaigns, advertisers pay for an interested lead (hence, cost
per lead) — i.e. the contact information of a person interested in the advertiser's
product or service. CPL campaigns are suitable for brand marketers and direct
response marketers looking to engage consumers at multiple touch points — by
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building a newsletter list, community site, reward program or member
acquisition program.
In CPA campaigns, the advertiser typically pays for a completed sale involving
a credit card transaction.
There are other important differentiators:
CPA and affiliate marketing campaigns are publisher-centric. Advertisers cede
control over where their brand will appear, as publishers browse offers and pick
which to run on their websites. Advertisers generally do not know where their
offer is running.
CPL campaigns are usually high volume and light-weight. In CPL campaigns,
consumers submit only basic contact information. The transaction can be as
simple as an email address. On the other hand, CPA campaigns are usually low
volume and complex. Typically, a consumer has to submit a credit card and
other detailed information.
PPC or CPC campaigns
Pay per click (PPC) and cost per click (CPC) are both forms of CPA (cost per
action) with the action being a click. PPC is generally used to refer to paid
search marketing such as Google's AdSense.
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Cost per click on the other hand is generally used for everything else including,
email marketing, display, contextual and more.
Also, pay per download (PPD) is another form of CPA, where the user
completes an action to download a specified file.
Tracking CPA campaigns
With payment of CPA campaigns being on an “action” being delivered,
accurate tracking is of prime importance to media owners.
This is a complex subject in itself, however if usually performed in three main
ways:
Cookie tracking – when a media owner drives a click a cookie is dropped on the
prospects computer which is linked back to the media owner when the “action”
is performed.
Telephone tracking – unique telephone numbers are used per instance of a
campaign. So media owner XYZ would have their own unique phone number
for an offer and when this number is called any resulting “actions” are allocated
to media owner XYZ. Often payouts are based on a length of call (commonly
90 seconds) – if a call goes over 90 seconds it is viewed that there is a genuine
interest and a “lead” is paid for.
Promotional codes – promotional or voucher codes are commonly used for
tracking retail campaigns. The prospect is asked to use a code at the checkout to
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qualify for an offer. The code can then be matched back to the media owner
who drove the sale.
Effective cost per action
A related term, effective cost per action (eCPA), is used to measure the
effectiveness of advertising inventory purchased (by the advertiser) via a cost
per click, cost per impression, or cost per thousand basis.
In other words, the eCPA tells the advertiser what they would have paid if they
had purchased the advertising inventory on a cost per action basis (instead of a
cost per click, cost per impression, or cost per mille/thousand basis).
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