CPA Marketing

 

 

 

 

What is CPA Marketing?

Historically, one of the great problems with advertising has been the difficulty in knowing how effective it has been.

John Wanamaker famously said ‘Half the money I spend on advertising is wasted – I just don’t know which half.’

The internet allows granular, end-to-end tracking of advertising from impression to completed (online) sale, and so starts to solve Wanamaker’s problem.

For online merchants who have full tracking capabilities, there are obvious advantages to move towards a system of pay-for-performance marketing – in other words, I will pay you for specific outcomes, instead of paying you to buy your inventory.

This has led to the growth of two inter-related fields – Affiliate Marketing, in which revenue generated is shared back with publishing partners, and CPA Advertising or CPA Marketing.

In a CPA campaign, a specific outcome is defined, such as a purchase, a service sign up, or a request to be contacted by the advertiser.

That acquisition, action or lead is tagged and measured, to determine the number of times that an ad has led to a successful out come.

The advertiser then pays per action generated – in other words, they are charged a Cost Per Action or Cost Per Acquisition. For lead generation, it may also be refered to as Cost Per Lead or CPL.

Metrics: Cost Per Acquisition (CPA)

The Question:

How much does it cost for each customer I acquire?

Approach:

Total media cost divided by number of customers gained

Commentary:

Some systems such as Yahoo’s Right Media system are now allowing direct marketers to buy media on a CPA basis. Google uses CPA optimiser to get as close as possible to a CPA price although payment is still made by CPC. An acquisition can be a purchase, an email signup, or some other tagged activity.

The Formula:

CPA = Media Spend/ Customers Acquired

or

CPA = Media Spend/ Clicks * Conversion Rate

 

 

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