Internet marketing has proven to be one of the most cost efficient mediums for businesses to find new customers. The internet reaches a global market, and because of the interactivity of the medium, one can selectively target laser precise demographics to improve returns on investment. Many companies turn to paid advertising to get traffic to their website. Cost per action (CPA) advertising is one of many paid advertising methods that businesses use to acquire new customers.
CPA advertising refers to an advertising model whereby a business owner pays for every particular action that might be taken on a product. This can represent a fee paid upon a product sale, or a payment upon a lead generated.
This contrasts with two other common methods of paid internet marketing, cost per impression (CPM) and cost per click (CPC). The CPM model has the advertiser paying for every time an online surfer has an ad appear on the visitors’ screen, whether the user interacts with it or not. CPC results in charges when the ad is actually engaged on and clicked by the user.
CPA advertising is particularly popular in that it can be relatively risk free. This is particularly true if the action is a sale, which some might recognize as a standard commission model. The business only pays money if it gets revenue, and presumably the profit margin on that piece of business should more than cover the advertising costs.
However, if the CPA action is the generation of a lead and not a sale, greater risks can be involved. A business must reliably know the average rate at which it can close a typical lead and must make sure that it is not receiving visitors from providers who send over poorly qualified leads, such as those who are not even interested in the company’s services.
While CPA advertising can be seem more risk free than CPM and CPC, the fact of the matter is that if a business knows its conversion statistics, CPM and CPC might actually represent advertising models with higher returns on investment. Generally businesses with a really good sales funnel will benefit from CPC over CPA, and those with good conversion funnels in addition to a captivating advertisement will benefit from CPM over all the advertising modalities. By split testing various methods, a business owner can discover the best advertising model for the business.
When website owners are looking for a proven to work strategy to get relevant visitors to their sites, they usually face the question; should they use CPP or CPA advertising methods? Indeed, the growth of CPA marketing companies show that that type of traffic and lead generation does pay off long term, and there are several good offers on the market, some other experts say that it is overrated and online businesses should go back to CPP advertising. First of all, the authors would like to define the two terms in online marketing, and then highlight the differences relating to the debate: CPP versus CPA in advertising.
What is CPP Advertising?
CPP basically stands for Cost Per Rating Point. This way the advertiser buys an ad space and the cost is determined as the cost of reaching one percent of the audience. Before setting up an online CPP advertising campaign, there is a need for researching the medium and finding out more about the user statistics. Checking whether the people visiting the site are interested in the product is essential, therefore, market and media research skills are needed. Measuring the performance of online ads is done by comparing the cost of reaching audience with the profits the campaign generates.
What is CPA Advertising?
CPA advertising is short for Cost per Action or Cost per Acquisition. This is a simpler method to measure results, as the user needs to take some action in order to bring in money. Some lead generation campaigns measure cost per lead and then convert this into CPA; how many leads it takes to generate a sale; how much money it is worth when a customer takes action. This is a simple method and measures conversions instead of reach.
Is There a Guarantee that CPA Works?
There are many CPA companies on the internet with different affiliates. There are newbies and advanced marketers among them, therefore, choosing the right pay per action campaign and company is essential. Some of these affiliates would also use CPP as an advertising method, in order to get conversions paying for displaying the company’s ad. There is not much control over where these ads go, but at least the merchant does not need to do the market research. As they only pay the CPA company for conversions or leads, the risks associated are lower than in CPP advertising.
The Benefits of CPP Advertising
Many experts say that provided that the company chooses the online medium right where they would want to reach the target audience, the cost of sales in CPP advertising is much lower. However, if the market research is neglected, it is a waste of money and time. One needs to test the two different methods and measure results to get an answer to the debate: CPP versus CPA in advertising.