Cost Per Action (CPA) – Learn About Cost Per Acquisition Marketing

Cost-per action or cost-per acquisition (CPA) is a method of paying for advertising that allows you to pay for each conversion (sale, lead, download, etc.) as opposed to each time a searcher sees or clicks on your ad.

The formula for a CPA is determined by the money you spend on your ads divided by the conversions you receive. For example, let’s say you spent $100 on an ad campaign. 50 users then viewed or clicked on your ad and made it to your purchase confirmation page within a 30 day span. Your CPA would then be $100/50 = $2.00.

CPA-based advertising can deliver your customers to you and guarantee that you won’t pay a dime unless until you make a sale. In the highly competitive and expensive world of Internet advertising, this is a rare bit of insurance for your company’s advertising budget.

But sales aren’t the only “actions” you can choose to pay for. If you offer registrations or subscriptions on your site, a CPA-based program can be very effective. If you are simply seeking new leads for your company by using an opt-in mailing list, you can utilize CPA-based advertising to guarantee interested leads.

The benefit of CPA advertising is obvious — you get what you pay for. And your ads will generally run in more places for longer if you decide to pay only for specified actions. This can translate to greater visibility for your company.

How it works
Now that you know what CPA-based advertising is, how does it work? When you place your ad with a CPA agency, or through a site that offers the ability to run CPA ads, your ad will begin to display as soon as it is added to the rotation.

First, you will need to decide what actions you are willing to pay for. You can use the traditional pay-per-click option, or pay by sale or by registration, whichever fits your advertising budget.

Once your ad begins to display, it will be in the rotation until the set amount of actions have transpired. If you require 100 sales from an ad campaign, your ad will display until you have reached 100 sales.

CPA stands for “cost per action”, and in this case, the action is the site visitor filling out the form. Compare this to traditional affiliate marketing, and you will see the beauty of it quickly. Done right, it is a much easier and more lucrative way to monetize a website.

A traditional affiliate must acquire traffic, do a good job of “pre-selling” the product, and send visitors on to the vendor site through an affiliate link, hoping to generate something like 1% to 5% sales, which in turn is highly dependent on the quality of the vendor’s sales letter and product. If the vendor does a poor job of selling on the sales site, or has an over-priced or poorly received product, the affiliate has spent a lot of time, and perhaps money, for very little return.

A CPA affiliate, on the other hand, has a much easier job of things. He or she must still acquire traffic, either by paying for it, or by putting together a well-optimized site that gets good search engine placement for certain key words. At that point, however, the CPA affiliate’s job is nearly complete.

The next step is for the site visitor to fill out a form requesting some sort of information. Keep in mind, this does not entail the visitor getting out his or her wallet, or making a decision to spend any money.
All it entails is that the visitor *request free information* and give his or her name and email address, and perhaps a physical address.

You, as the CPA affiliate, get paid *even though your site visitor has yet to buy anything*. You are getting paid for a LEAD, not a sale.

Many people have no idea how huge and lucrative lead generation is, and not a clue the kind of money that certain businesses will pay for a good lead. Things like mortgage and insurance leads, in particular, are very, very valuable, as are credit card leads. But even something as seemingly inexpensive as a cell phone ring tone can bring you a nice commission per lead. Why?

These lead purchasers are planning on maximizing the long-term value of a customer. In the case of a mortgage, one lead can generate a commission of thousands of dollars to a mortgage broker. An insurance or credit card account is worth recurring commissions potentially for many, many years. Even a ring tone lead has a long-term value, since the vendor will continue to market to that person over and over again, selling them many times what it cost to acquire them as a customer.

CPA is big, big business, and one of the best ways there is to monetize your web site. If you are looking for easy and lucrative ways to monetize a web site, CPA affiliation could be your answer. To really do well at CPA, you need to learn how to use traffic generation methods like Google Adwords effectively, but in the long run, CPA is far easier and more lucrative than traditional affiliate marketing.