Several different options are available today when choosing an affiliate marketing model. Some models track sales exclusively while others simply track how many times advertisements are displayed. Cost-per-action marketing is actually one of the best choices available for any business. It is a dynamic model that controls costs while still rewarding affiliates for targeted traffic. It is important to understand why cost per action is superior to other marketing models.
Cost Per Action or Acquisition (CPA)
Businesses using a CPA marketing model will only pay out to affiliates or other websites if a sales lead takes a specific action. This action is usually more than just clicking a link. The action could be subscribing to a newsletter with a valid email address, filling out an online form or even paying for a service or product. CPA is one of the most effective marketing models because it is very direct and only results in payments after customers have taken an action that positively benefits the business. It is also far more flexible and instantly measurable than other techniques.
Cost Per Click (CPC)
CPC marketing means a company will pay a website or affiliate every time an advertisement is clicked. The lead does not have to do anything more than pass through the affiliate link to a landing page. The cost of CPC campaigns can accumulate fast. Some advertisers even set a limit on the CPC budget so that ads are removed from sites if too many clicks occur. The CPC model does not provide companies with the same low acquisition costs as CPA since fees are paid even if a user accidentally clicks on the advertisement. Additionally, some CPC campaigns are vulnerable to click fraud.
Cost Per Thousand (CPM)
CPM marketing allows business to pay for the appearance of an ad and not for actual clicks or actions. Companies pay a set amount for every 1,000 impressions of an advertisement. The click-through rate does not measure into costs. Although very common, CPM marketing does not drive the same returns as CPA programs. Ads could be displayed erroneously or due to poorly chosen keywords. CPM is frequently used just to improve brand awareness or to spread a message rather than to increase sales.
Cost Per Sale (CPS)
CPS marketing is basically a commission model. This type of marketing will pay an affiliate or website for each product or service that is sold. Clicks or other actions are not measured or paid for. Although the CPS model might seem ideal at first, it actually has several drawbacks when compared to CPA. The first is that the payments will reduce margins consistently. Another drawback is that CPS can require more adjustment and analysis of landing pages or sell pages in order to increase returns. CPA is usually a better choice even if it includes some CPS features.
Why CPA Is the Best Marketing Choice
The reality is that CPA marketing is the best choice for most companies online today. It is not as wasteful as CPC marketing. It is not as unpredictable as CPM marketing. It also is much more flexible than CPS marketing. Using CPA affiliate marketing will allow a business to control costs and tie them directly to the actions needed to convert leads. This type of marketing is also easier for some affiliates since they can focus more on the larger brand rather than a specific metric. CPA campaigns can be effectively streamlined and refined for nearly any type of online business.