- Cost per action
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Cost Per Action or CPA (sometimes known as Pay Per Action or PPA) is an online advertising pricing model, where the advertiser pays for each specified action (a purchase, a form submission, and so on) linked to the advertisement.
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. An action can be a product being purchased, a form being filled, etc. 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."
The CPA can be determined by different factors, depending where the online advertising inventory is being purchased.
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CPA as "Cost Per Acquisition"
CPA is sometimes referred to as "Cost Per Acquisition", which has to do with the fact that most CPA offers by advertisers are about acquiring something (typically new customers by making sales). Using the term "Cost Per Acquisition" instead of "Cost Per Action" is not incorrect in such cases, but not all "Cost Per Action" offers can be referred to as "Cost Per Acquisition".
PPL as "Pay Per Lead"
Online advertising payment model in which payment is based solely on qualifying leads.
In a pay per lead agreement, the advertiser only pays for leads generated at their destination site. No payment is made for visitors who don't sign up.
A lead is generally a signup involving contact information and perhaps some demographic information; it is typically a non-cash conversion event. A lead may consist of as little as an email address, or it may involve a detailed form covering multiple pages.
One risk to the advertiser is the potential for fraudulent activity by incentivized 3rd-parties or marketing partners. Some false leads are easy to spot. Nonetheless, it is advisable to make a regular audit of the results.
Differences between CPA and CPL advertising
In CPL 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 touchpoints — by 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:
- CPL campaigns are advertiser-centric. The advertiser remains in control of their brand, selecting trusted and contextually relevant publishers to run their offers. On the other hand, 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, consumer has to submit credit card and other detailed information.
Effective cost per action
A related term, eCPA or Effective Cost Per Action, is used to measure the effectiveness of advertising inventory purchased (by the advertiser) via a CPC, CPI, or CPM 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).
References
Categories:- Pricing
- Internet advertising methods
- Compensation
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