When a business sells products online, it can reach a virtually broad audience, but targeting and converting the right leads is not always easy. To calculate how much it costs a company every time their ad results in some action (usually a sale), they use a metric called cost per acquisition (CPA).
CPA is a vital part of digital marketing strategies, helping increase the number of customers, spread the word about your business, and thus, improve sales. So, what role does CPA play in digital marketing? Let’s find out together through the insights of our industry experts.
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What Is CPA in Digital Marketing?
The CPA marketing model is a type of low-risk affiliate marketing that companies use to scale their marketing efforts and convert a vast audience. It comprises a publisher (affiliate), a company/business (advertiser), and a CPA network.
This CPA network is a platform that brings together the affiliates willing to earn commissions by promoting products and the businesses that want their products promoted.
The affiliates can be publishers or influencers with relevant content and established audiences. Influencers endorse the products they like and earn sales commissions, while businesses reach a wider customer base.
How Does CPA Work?
To understand what CPA means in marketing and its fundamental importance, we need to analyze how it works.
Affiliate digital marketing companies reach out to third parties via the CPA network. This matches the advertiser with an affiliate that likes the product and is more likely to sell it effectively while earning a commission. At the same time, the business grows its reach across external websites, social media, or blogs.
In the CPA marketing model, the company pays the publisher a fixed amount only after a specific action or acquisition occurs from the ad, rather than paying upfront. This is what sets the CPA model apart from other tactics like cost per click (CPC) where the payments occur before your ad is even published.
Simply put, CPA advertising is performance-based, as the fee depends on the output of the reader or the viewer, which is tracked through marketing analytics and metrics.
Hence, this arrangement places more risk and pressure on the publisher, as their earnings depend directly on their ability to attract and convert the audience into high-paying customers. On the other hand, CPA advertising is low risk for the advertiser because they only pay for ads that result in conversions. It is also beneficial for publishers with extra ad space to fill.
What Are the 3 Categories of CPA in Digital Marketing?
The CPA advertising model can be categorized into three types:
1. Pay Per Action
In this category, the publisher receives a commission only when the customer takes a particular action, such as visiting the advertiser’s website, signing up for a trial, or subscribing to a newsletter.
2. Pay Per Sale
In this model, the advertiser pays the publisher a commission or percentage of the product’s sale price after a customer makes a purchase.
3. Recurring Payments
In this model, the publisher receives a commission not just for the initial purchase, but for every repeat purchase the customer makes.
Benefits of CPA in Marketing
CPA offers many in digital marketing — the most obvious being the ability to reach a wider audience and get a higher return on ad spend (ROAS).
Some of the other prominent advantages are:
Integrated Advertising
By partnering with publishers, companies can build product awareness with a broader audience. This is because influencers and content creators have audiences that trust them. So, promoting your products on their platform benefits your brand’s reputation.
Increased Return-On-Investment (ROI)
CPA marketing offers a higher ROI because businesses only pay a commission when a sale is made. The commission can be a percentage of the sale price or a flat rate. This makes this model highly affordable.
Reduced Risk
CPA marketing is an essentially low-risk form of affiliate marketing since businesses are required to pay only after a conversion. This makes sure that any referral generates value. Simultaneously, this safeguards against affiliates inflating website traffic or clicks artificially.
Ease of Use
It is relatively easy to set up a CPA marketing campaign. You can simply choose a CPA network and a suitable offer with a low upfront cost. Alternatively, you can appoint an affiliate manager to negotiate affiliate agreements and have the commissions paid automatically by the chosen payment processor.
What Are the CPA Online Marketing Best Practices?
There are certain CPA online marketing best practices recommended by some of the best digital marketing consultants.
Bonding With the Affiliate Managers
An affiliate manager in the CPA model is integral because they oversee the affiliate program on your behalf. That is why it is essential to find an affiliate manager who builds a positive relationship with the affiliate partners.
The affiliate managers also often provide creative input to ensure affiliate partners create the most relevant content. A good bond means you can negotiate with the publishers as per your requirements.
Avoiding Shady Networks
When affiliates artificially inflate engagement metrics such as traffic or clicks to earn commissions, affiliate fraud occurs. Some affiliates also publish low-quality content that harms your brand reputation.
Avoid such shady networks by choosing a high-quality CPA network that promises a strict vetting process for publishers.
Joining a CPA Network
For beginners in online marketing, joining a good CPA network simplifies the process of choosing a CPA offer and getting referral traffic from affiliate sites. Look for networks that provide a powerful dashboard for tracking important metrics.
With a CPA network, you can use marketing analytics tools and enjoy a wide range of offers. Some networks also offer creatives, such as banners, landing pages, and recommended ad copies that make it easy for beginners to kickstart a campaign.
Implementing Traffic Strategies
Once you’ve joined a network, it’s time to drive traffic to your website. The most common traffic-implementing strategies are email marketing, SEO, PPC ads, native ads, social media, and Google ads.
Considering the CPA Marketing Payment System
When setting up payments for affiliate commissions, choose a payment structure and processor that aligns with your business goals. Decide whether you'll pay affiliates based on pay-per-click, pay-per-action, or recurring sales.
Many CPA payment processors offer fraud prevention and chargeback protection. This is kind of a money-back guarantee in case a customer backs out of a sale. A payment processor also enables you to track and manage your CPA marketing expenses from a dashboard.
What Is CPA in Digital Marketing Takeaways
CPA’s meaning in marketing essentially comes down to it being a cost-effective yet high-ROI form of affiliate marketing. It enables companies to reach niche audiences by partnering with influencers and generating money online.
As a business looking to get started, the first step is to join a CPA network and work with an affiliate manager. This manager will match and connect you with qualified publishers.
Remember: Selecting the ideal CPA network is often the key to achieving the best possible conversions and revenue from CPA marketing.
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