Cost Per Action Marketing For Affiliates – CPA Explained
CPA networks, or affiliate marketing operations based on a Cost-Per-Action model, have been around for years, even though they’re seldom discussed in the Internet Marketing arena, and just slightly more often in the affiliate marketing realm. Cost per action, also sometimes called cost per acquisition, is like most other affiliate marketing programs in that you make money from actions taken by targeted traffic your refer to the merchant’s site – but that’s where the similarity usually ends.
In regular affiliate programs, the money you earn is a percentage of each sale you make. With CPA offers, usually you’re earning your affiliate commissions based not on sales but on other actions the merchant wants to effect. It can be downloading a free report, asking for a free sample, having free information mailed out to you, getting access to a private members’ area of a website, etc.
As you can see from the above examples, cost-per-action or cost-per-acquisition is usually modeled so that you’re getting paid for free actions taken by the traffic you refer. So if you’re firmly planted in the affiliate marketing mindset, alarm bells are probably going off in your head right now… After all, what kind of shady operation is promising to pay you commissions when you haven’t made any sales? As if they had the money to just give away like that… Yeah, right!
If that’s what you’re thinking, here’s a real surprise for you: almost without exception, these cost per action arrangements are set up by, or on behalf of, some of the biggest offline companies in the world, including insurance companies, travel companies, offshoots of international banking consortiums, etc. These very large, very dependable corporations use cost per acquisition models to get leads from targeted prospects, leads they obviously hope to convert to ongoing clients. Their lead acquisition programs are tested, tweaked, and tested again, and are some of the most closely monitored results of any online activities anywhere.
It’s very important to remember that marketing is much more mature and professional in the offline world than in most of the online world. Look at the highly-varied background of today’s Internet marketers and affiliate marketers – surprisingly few have a solid marketing background or any formal marketing education at the post-secondary level. While many are earning 6, 7 or 8 figures a year online, most couldn’t even secure a junior-level position in corporate marketing departments – especially not on an international scale.
As a result, online marketers look at what they make on each sale and offer a piece of that to their affiliates. Affiliate marketers look at the product, the conversion rate of the salespage, and the percentage offered as affiliate commissions. Everything is based on the current sale in most cases. The closest most come to a CPA model is offering 100% commissions, meaning that really they’re giving away the sale to get the lead. But again, even 100% commissions are based solely on the current sale.
High-level offline marketing, however, is based on the lifetime value of each customer and factors in the ratio of leads to sales, the average retention rate and longevity of client contracts, and the total dollars earned from the ‘average’ customer or client. While this involves a lot of research and number-crunching Internet marketers are loath to even attempt, it allows lead acquisition programs to blow online marketers out of the water in terms of payouts.
Newer affiliates try to sign up in droves, often spurred on by e-books about CPA programs that tout the high earning possible from a pay-per-lead program. They don’t realize that corporations are very protective both of their brand’s image and of the quality of leads they receive – remember that the conversion ratio is one of the main factors in determining what they pay per lead. This results in as many as 90% of all applications to CPA networks being rejected, dashing the affiliate’s hopes for big CPA earnings.
In truth, without an existing track record in CPA, or very professionally-designed websites heavy in marketing psychology, most marketers will never get into the CPA networks and have a chance at earning money with cost per action opportunities. New CPA networks are coming online though that raise the bar for average marketers, providing both cost per acquisition offers and pre-designed websites shown to drive the right quality of traffic to the merchants’ sites and opt-in forms. These should finally open the cost per action field up to a great many more online marketers, finally making it a viable way for affiliate marketing businesses to make money online using the CPA model.
Doug Champigny is a world-famous Internet marketing mentor, speaker and super-affiliate. For more help from Doug Champigny, visit his Internet Marketing blog and his Captain Affiliate Affiliate Marketing Training Blog.
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