What Is CPA Marketing? The Ultimate Guide (2023)
What is cost per action (CPA)?
The cost per action (CPA) is in the area of affiliate marketing and describes the commission from users who carry out an action. An action can be a purchase or the transmission of data using a form, eg registration for the newsletter. A purchase is billed as a cost per order or cost per sale, while a newsletter subscription is defined as a cost per lead .
How is the CPA calculated?
The CPA is calculated roughly as follows:
Example: If advertisements with a value of 200 euros are placed in one month and 80 sales, bookings and/or inquiries are generated, this results in a CPA of 2.50 euros. An action then cost an average of 2.50 euros, which then means cost per action.
What can I use the CPA for?
If you add other values to the calculation, such as the sales generated as a result or the shipping costs, you can make statements about how successful a marketing campaign is.
To stay with the example: If 80 sales of a certain product worth 10 euros were made with the 200 euros, this results in a turnover of 2,000 euros. If you add the shipping costs of 2 euros and handling costs of 1 euro per product sold, you get a profit of 7 euros. If the value of the product is less than 7 euros, it is a profit and the campaign was successful. If the value of the goods is higher than these 7 euros, this marketing campaign is too expensive and should either be massively optimized or discontinued.
Examples of cost per action
Different types of deals can be defined as conversions, e.g.:
- Sales – product purchases
- contracts
- Download of documents, software
- Registration for the newsletter or community
- Registration for a competition
- requesting information material
Benefits of the Cost per Action (CPA) model
The CPA is a very cost-intensive but extremely secure billing method, as it is purely success-based. In contrast to CPM , where a thousand-click price or CPC is a model for billing per click, this method offers minimal risk with high profitability.
Disadvantages of the Cost per Action (CPA) model
The cost of an action is significantly higher than that of a simple click. This is a manageable risk for the advertiser, whereas for the affiliate everything is billed based on performance.
CPA in Google ADs (Adwords)
In Google ADs (Adwords) you have the option of storing two types of bid types as CPA:
- Target CPA An average CPA is set, while some conversions may be above, some below. The average conversion costs can be defined using the target CPA.
- Maximum CPA If a campaign has achieved at least 200 conversions in the last 30 days, the advertiser can enter a maximum CPA that he is willing to pay for a conversion.
In both cases, please note that these values are a combination of the CPC and CPA, since the system uses the previous data from your campaigns to try to adjust the bids so that they reach the desired values. However, the costs (CPC) are incurred for you as an advertiser from the start.
Conclusion
Based on an optimized landing page or target page, the "Cost per Action" billing model can represent an interesting remuneration model. Especially in the affiliate area, your website should perform accordingly in order to achieve the best possible results for you and the affiliate.