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Cost per action (CPA), also sometimes misconstrued in marketing environments as cost per acquisition, is an online advertising measurement and pricing model referring to a specified action, for example, a sale, click, or form submit (e.g., contact request,
newsletter A newsletter is a printed or electronic report containing news concerning the activities of a business or an organization that is sent to its members, customers, employees or other subscribers. Newsletters generally contain one main topic of i ...
sign up, registration, etc.). Direct response advertisers often consider CPA the optimal way to buy online advertising, as an advertiser only considers the measured CPA goal as the important outcome of their activity The desired ''action'' to be performed is determined by the advertiser. In
affiliate marketing Affiliate marketing is a marketing arrangement in which affiliates receive a commission for each visit, signup or sale they generate for a merchant. This arrangement allows businesses to outsource part of the sales process. It is a form of ...
, this means that advertisers only pay the affiliates for leads that result in the desired action such as a sale. This removes the risk for the advertiser because they know in advance that they will not have to pay for bad referrals, and it encourages the affiliate to send good referrals. Radio and TV stations also sometimes offer unsold inventory on a cost per action basis, but this form of advertising is most often referred to as "per inquiry". Although less common, print media will also sometimes be sold on a CPA basis.


CPA as "cost per acquisition"

CPA is sometimes referred to as "cost per acquisition", which has to do with the fact that many actions which advertisers are optimizing towards are about acquiring something (typically new customers by making sales), although this has led to confusion in the marketing industry as to the correct meaning of CPA. Adding to the confusion, "cost per acquisition" may be used where it actually is customer acquisition cost (CAC).


Formula to calculate cost per action

Cost per action (CPA) is calculated as the cost divided by the number of actions being measured. So, for example, if the spend is $150 on a campaign and the actions attributed to this campaign is 10, this would give the campaign a cost per action of $15.


Pay per lead

Pay per lead Cost per action (CPA), also sometimes misconstrued in marketing environments as cost per acquisition, is an online advertising measurement and pricing model referring to a specified action, for example, a sale, click, or form submit (e.g., conta ...
(PPL) is a form of cost per acquisition, with the "acquisition" in this case being the delivery of a lead. Online and Offline advertising payment model in which fees are charged based solely on the delivery of leads. In a pay per lead agreement, the advertiser only pays for leads delivered under the terms of the agreement. No payment is made for leads that don't meet the agreed-upon criteria. The service provider company can use multiple methods to bring traffic to a landing page designed to generate lead with validation and tracking system to make sure the client gets authentic valid leads. Leads may be delivered by phone under the pay per call model. Conversely, leads may be delivered electronically, such as by email, SMS, or a ping/post of the data directly to a database. The information delivered may consist of as little as an email address, or it may involve a detailed profile including multiple contact points and the answers to qualification questions. There are numerous risks associated with any Pay Per Lead campaign, including the potential for fraudulent activity by incentive marketing partners. Some fraudulent leads are easy to spot. Nonetheless, it is advisable to make a regular audit of the results.


Differences between CPA and CPL advertising

In
Cost Per Lead Cost per lead, often abbreviated as CPL, is an online advertising pricing model, where the advertiser pays for an explicit sign-up from a consumer interested in the advertiser's offer. It is also commonly called ''online lead generation''. Co ...
campaigns, advertisers pay for an interested lead (hence, cost per lead) — i.e., the contact information of a person interested in the advertiser's product or service. CPL campaigns are suitable for brand marketers and direct response marketers looking to engage consumers at multiple touchpoints — by building a newsletter list, community site, reward program or member acquisition program. In CPA campaigns, the advertiser typically pays for a completed sale involving a credit card transaction. There are other important differentiators: * CPA and
affiliate marketing Affiliate marketing is a marketing arrangement in which affiliates receive a commission for each visit, signup or sale they generate for a merchant. This arrangement allows businesses to outsource part of the sales process. It is a form of ...
campaigns are publisher-centric. Advertisers cede control over where their brand will appear, as publishers browse offers and pick which to run on their websites. Advertisers generally do not know where their offer is running. * CPL campaigns are usually high volume and light-weight. In Cost per lead campaigns, consumers submit only basic contact information. The transaction can be as simple as an email address. On the other hand, CPA campaigns are usually low volume and complex. Typically, a consumer has to submit a credit card and other detailed information.


PPC or CPC campaigns

Pay per click (PPC) and
cost per click Pay-per-click (PPC) is an internet advertising model used to drive traffic to websites, in which an advertiser pays a publisher (typically a search engine, website owner, or a network of websites) when the ad is clicked. Pay-per-click is usually ...
(CPC) are both forms of CPA (cost per action) with the action being a click. PPC is generally used to refer to paid search marketing such as
Google Google LLC () is an American multinational technology company focusing on search engine technology, online advertising, cloud computing, computer software, quantum computing, e-commerce, artificial intelligence, and consumer electronic ...
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AdSense Google AdSense is a program run by Google through which website publishers in the Google Display Network, Google Network of content sites serve text, images, video, or interactive media advertisements that are targeted advertising, targeted to ...
or Google Ads. The advertiser pays each time someone clicks on their text or display ad. When advertising in the Google platform, CPC bidding means that an advertiser pays for each click of an ad placed and that, in ad campaign, he can set a price cap as a maximum CPC bid. Here, the CPC pricing is also sometimes referred to as PPC. In the
Facebook Facebook is an online social media and social networking service owned by American company Meta Platforms. Founded in 2004 by Mark Zuckerberg with fellow Harvard College students and roommates Eduardo Saverin, Andrew McCollum, Dustin Mosk ...
social networking platform, the term pertains to the average cost for each link click and it serves as a metric in online advertising for benchmarking online ad efficiency and performance. CPC in the Amazon Marketing Service (AMS) follows the same model, although it is reported that this platform charges lower CPCs compared to other advertising platforms with Google charging the highest. Also, pay per download (PPD) is another form of CPA where the user completes an action to download a digital content such as apps, digital media, and other files. The actions can include completing surveys or answering quiz in order to generate revenue from a third-party advertiser.


Tracking CPA campaigns

With the payment of CPA campaigns being on an "action" being delivered, accurate tracking is of prime importance to media owners. This is a complex subject in itself, however, if usually performed in three main ways: #
Cookie tracking HTTP cookies (also called web cookies, Internet cookies, browser cookies, or simply cookies) are small blocks of data created by a web server while a user is browsing a website and placed on the user's computer or other device by the user's w ...
– when a media owner drives a click a cookie is dropped on the prospect's computer which is linked back to the media owner when the "action" is performed. # Call tracking – unique telephone numbers are used per instance of a campaign. So, media owner XYZ would have their own unique phone number for an offer and when this number is called any resulting "actions" are allocated to media owner XYZ. Often payouts are based on a length of call (commonly 90 seconds) – if a call goes over 90 seconds it is viewed that there is a genuine interest, and a "lead" is paid for. #
Promotional code In marketing, a coupon is a ticket or document that can be redeemed for a financial discount or rebate when purchasing a product. Customarily, coupons are issued by manufacturers of consumer packaged goods or by retailers, to be used in ...
s – promotional or voucher codes are commonly used for tracking retail campaigns. The prospect is asked to use a code at the checkout to qualify for an offer. The code can then be matched back to the media owner who drove the sale.


Effective cost per action

A related term,
effective cost per action Cost per action (CPA), also sometimes misconstrued in marketing environments as cost per acquisition, is an online advertising measurement and pricing model referring to a specified action, for example, a sale, click, or form submit (e.g., conta ...
(eCPA), is used to measure the effectiveness of advertising inventory purchased (by the advertiser) via a
cost per click Pay-per-click (PPC) is an internet advertising model used to drive traffic to websites, in which an advertiser pays a publisher (typically a search engine, website owner, or a network of websites) when the ad is clicked. Pay-per-click is usually ...
,
cost per impression Cost per impression (CPI) and cost per thousand impressions (CPM) are terms used in traditional advertising media selection, as well as online advertising and marketing related to web traffic. They refer to the cost of traditional advertising or ...
, or
cost per thousand Cost per mille (CPM), also called cost per thousand (CPT) (in Latin, French and Italian, ''mille'' means ''one thousand''), is a commonly-used measurement in advertising. It is the cost an advertiser pays for one thousand views or impressions of ...
basis. In other words, the eCPA tells the advertiser what they would have paid if they had purchased the advertising inventory on a cost per action basis (instead of a cost per click, cost per impression, or cost per mille/thousand basis). If the advertiser is purchasing inventory with a CPA ''target'', instead of paying per action at a fixed rate, the goal of the effective CPA (eCPA) should always be below the maximum CPA.


References

{{Reflist Pricing Online advertising methods Compensation methods