When launching a product, it is often relevant to look for an invoicing method based on profitability. The CPA, particularly used in affiliation, allows you to pay only for marketing actions that work.
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What is CPA in Marketing?
The CPA or cost per action is a way of billing advertising space or marketing actions. The calculation is made on the basis of the impact of the campaign: in other words, the advertiser pays only for the concrete results he obtains. CPA is used primarily in affiliate strategies.
How does the CPA work?
CPA is a payment method that existed before the internet. It is, for example, used in telemarketing: salespeople are paid according to the actions they get from their prospects and customers.
In which situation to use the CPA?
Today, the cost per action is used in the remuneration of the affiliation, a strategy which brings together 3 players: an affiliate, an advertiser and a platform.
The operation is relatively simple. The advertiser usually has a product to sell. This can be an application, a subscription to an online service, coaching or even computer equipment. To make it known, it calls on affiliates to entrust them with the mission of promoting it.
In this type of collaboration, the CPA is often used: for each action taken by the prospects, the advertiser pays the affiliate in the form of a fixed amount or a percentage of the sale price, as the case may be.
Advertiser and affiliate can work directly, but they also have the possibility of going through an affiliate platform, whose role is to put them in touch and manage their partnership.
Actions obtained by the affiliate
The actions implemented by affiliates are very varied and are not limited to the sale of a product. In particular, they can obtain:
- An e-mail address.
- A request for an estimate.
- A telephone meeting.
- Registration for a webinar.
How the average CPA is calculated
To find the average CPA for a campaign, all you need to do is do a simple calculation. Divide the total amount invested by the number of conversions. For example, if an action cost $ 15,000 in total generated 300 sales, the average CPA would be $ 50. This figure provides benchmarks for comparing the different campaigns and for evaluating the effect of various optimizations implemented throughout the operation.
Example of a collaboration involving a CPA
To better understand how the CPA works, here is a concrete example of a partnership between a cosmetics company and a beauty blogger.
After seeing the importance of its internet traffic, the company contacted a blogger to suggest an affiliate project. The conditions are simple: it will receive 10% on sales made thanks to its promotional actions. Once the market is accepted, the company provides it with an affiliate link that will allow the source of the traffic to be traced. Visitors who come directly to his site will earn him a commission, provided of course that they make a purchase. For example, if one of them orders for 50 euros of products, she will receive 5 euros. For the company, these 5 euros represent part of the cost per action. They should also count what they spent to implement their strategy (tools, platform and other costs).
The cosmetics company can thus work with several bloggers and influencers in order to multiply its acquisition channels. For her, it’s a quick and relatively easy way to gain market share, without taking a dime out of her pocket.
For her part, the blogger will implement a strategy to encourage her visitors to buy the company’s products. She can write a test article for each article or make a video where she shows how to use them. Often, to encourage the act of purchase, the blogger offers a promotional code provided by the brand.
Why choose the CPA?
A limited investment
Since the advertiser only pays when a defined goal has been met, the upfront investment does not need to be significant. Unlike a classic advertising campaign that requires a lot of money, without having the guarantee of any result, the CPA allows you to launch your strategy without spending your capital. Here, the sale precedes the payment of the means implemented to achieve it.
A good KING
From the moment the advertiser has succeeded in precisely defining his target, the return on investment of the CPA is high. The acquisition channels are indeed very well marked out by the affiliates. They have spent time building and refining a community that contains a significant percentage of qualified leads. The traffic redirected to the advertiser’s site is therefore of high quality. Not to mention the fact that leads maintain a relationship of trust with the affiliate and that they are particularly sensitive to his recommendations.
For the advertiser, the stake is therefore mainly in the choice of its affiliates. He must select them carefully in order to gain easy access to his core target.
Little risk, lots of control
Affiliate strategy and CPA have the advantage of being completely under control. Affiliates can be followed by the advertiser: he therefore keeps an eye on the actions put in place to achieve the objectives set. He can also monitor the editorial line used in order to judge whether it corresponds to the values of his brand.
There is no such thing as zero risk, but its image is still well protected. In the event of a problem, he can intervene quickly and put an end to counterproductive collaborations.
A quick and easy strategy to implement
CPA is one of the most effective strategies, especially if you start from scratch. Getting started on the web can seem difficult at first. You have to build an audience through SEO or social networks for example. It takes time and requires diligent effort. It is also possible to pay for advertisements via search engines or again, social networks. This solution is faster, but expensive, while no results are guaranteed.
The CPA allows you to quickly access the lead of an influencer without taking financial risks. The set-up is done in a few clicks, usually via an affiliate management platform. Once the collaborations are launched, the advertiser just has to wait for the affiliates to work for him.
CPA is a payment method used in affiliate strategies. It’s a great way to expand your audience without investing large sums of money. It is therefore a low-risk method which, moreover, generates good results. For some niche products or services, it may be enough to create the expected profits. When the target is larger, it can be used in addition to social selling, content strategy or any other means adapted to the product and the brand.
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