What is the Cost per Acquisition (CPA)?

Cost per acquisition, cost per action or pay per acquisition are the different names of the same
things. It refers to a method of internet advertising payment method. In this method, the
advertiser pays the advertising medium for a specified acquisition, the acquisition may be
signup for newsletter, form submission, survey completion or a sale.

Cost per acquisition (CPA) is a type of affiliate marketing. It is performance-based marketing, in
which the advertiser pays the affiliate on the amount of customer brought or converted
through the affiliate’s marketing campaigns. This type of marketing has four main players:

  1. The business or brand
  2. The medium or agency used for marketing
  3. The affiliate
  4. Customer

Many marketing campaign leaders for any brand prefer cost per acquisition (CPA) for their
campaigns as they will only be paying for good referrals and get an increase in conversion rate
as well. The formula to calculate the cost per acquisition (CPA) is:

Cost per acquisition = total cost / no. of acquisitions

If you pay $50 for 80 acquisitions, your cost per acquisitions (CPL) is $0.625

Pay per lead

Pay per lead (PPL) is a type of cost per acquisition. This model solely works on the generation of leads. The payments are made based on how many leads the medium generates for you. The brand only pays the advertising medium according to the number of leads they generate for the brand. Say you paid $100 to the medium for the generation of 1000 leads, your pay per lead (PPL) is $0.10.

The lead can be provided in any form. Their cell phone numbers, their names, email addresses, postal addresses. Or all these things combined and a complete profile on their biodata. It is very easy to scam the pay per lead (PPL) model. Frequent frauds are spotted if you conduct an audit on a weekly basis.

Difference between Cost per acquisition (CPA) and Pay per lead (PPL)

In Cost per acquisition (CPA) the business pays the medium for a sale. In most cases when a transaction is made with the business.

Whereas in pay per lead (PPL) the business pays the medium for every lead generated. Different businesses prefer leads in different forms. Some businesses conduct their marketing activities through emails so they require an emailing address for building a newsletter. Similarly, many businesses conduct their marketing activities through telemarketing, so they require a cell phone number. Making a sale is solely the responsibility of the business unlike the Cost per acquisition (CPA) model. The medium will just provide you with a lead and then the business has to make a conversion.

Cost per click

Cost per click (CPC) or pay per click (PPC), different names for the same thing, is also a type of
cost per acquisition (CPA) method. As clear from the name, the business pays the advertising
medium every time the ad is clicked. Many websites operate on this model like Facebook ads,
Google Adworks and Amazon Marketing Services. According to statistics, Amazon has the
lowest cost per click (CPC) rates while Google has the highest.

Cost per download

It is another form of cost per acquisition (CPA) where the advertising brand pays the advertising medium whenever the user completes an action like downloading an app, any game or the ebook. In this method of advertising, three parties can benefit:

  1. The advertising business, their business is promoted and traffic is sent their way
  2. The advertising agency, the make money every time the user completes an action
  3. The third part(if any) that is providing the app or the game which is to be downloaded

CPA campaign tracking

Since cost per acquisition (CPA) campaigns pay off when a certain action is taken by the user, it at the same time is most vulnerable to frauds and scams. It gets really tough and complex to keep track of a cost per acquisition (CPA) marketing campaign but usually, three prime ways are used for this purpose:

  1. Cookie tracking – When a media owner pushes a cookie click on the prospect's computer that is linked back to the media owner when the "job" is finished.
  2. Telephone tracking – Per campaign example, specific telephone numbers are used. And media owner XYZ would have their own specific phone number for a bid and any future actions will be assigned to media owner XYZ when this number is called. Payouts are often dependent on a call length (usually 90 seconds)–if a call goes past 90 seconds, it is perceived as having a genuine interest and a lead is paid for.
  3. Promotional codes – Commonly used for monitoring sales promotions are promotional or coupon codes. The prospect is asked to use software to qualify for an offer at the checkout. The code can then be linked back to the sale-driven media holder.

Ending note

As an internet marketer, you have to take all these things into account before invested your
client’s money into something. Besides all these parameters, there are a few other parameters
that also need to be taken into account since all of these are correlated. You simply cannot rely
on one parameter and trust, there are a ton of other things that have to be taken into account
as well.