Online advertising can provide a huge boost to your business in terms of brand awareness, traffic to your site, and even leads and sales. When it comes to search engine advertising or advertising on other major platforms, you have three main ways to structuring your advertising campaign. These are cost per impression, pay per click, and cost per action. There is a lot of buzz around cost per action advertising at the moment, especially with Google joining the market for this kind of marketing along with major existing cost per action specialists like Clickbooth. For many businesses, however, pay per click or even cost per impression advertising is all they use, so if this is the case for you, it is well worth coming to understand how cost per action works and the pros and cons of using it for your business.
How Does Cost Per Action Differ From Pay Per Click?
Cost per action is an option whereby you don’t pay for the ads to be displayed to people (impressions), or even for the people who respond to the ads by visiting your site (clicks), but you pay every time someone who finds your site as the result of an ad performs a certain action that either gives you a lead (for example joining your mailing list or sending a web inquiry via your online form), or a sale (signing up for your service or making a purchase). Effectively, when you use cost per impression you are paying for people to see your message or brand, with pay per click you are paying for traffic to your page, and with cost per action you are paying for actual conversions from visitors to qualified leads or customers.
What Are the Main Advantages of Using Cost Per Action Advertising?
The best thing about cost per action advertising is that it is very low risk. You are only paying when your ad is effective in converting someone, rather than every time someone sees it (and potentially ignores it), or every time someone clicks your link but then bounces straight off your site in seconds. Every time you pay, it is because someone has either qualified themselves as a lead, or become a customer.
Another advantage is that it is very easy to work out your return on investment and how your campaign is going with cost per action. This means you can follow your campaign in real time and tweak it as and when you see ways of improving your message or who it is targeted at.
Are There Any Disadvantages to Cost Per Action?
Cost per action is, understandably, a lot more expensive per unit than pay per click. This is all well and good if you are good at converting your leads to sales and make enough profit from your sales to cover your advertising costs, but it can introduce risk if your lead to conversion ratio is bad or you make very little on your sales. Cost per action on sales is usually a percentage of the sale value that is agreed in advance with the company publishing your ads, so you need to make sure you aren’t actually making a loss when this is taken out. For leads, you pay a set fee per action, and you need to know you are good enough at converting leads to be able to meet those costs and still make a good profit.
There are of course certain scenarios where you may be prepared to take a little bit of a loss on your advertising to build up a better following or get some more brand awareness, but you do need to know that that is what kind of campaign you’re doing before the bills for your advertising come in so you don’t get any nasty surprises!
Cost Per Action is Not Available To All Businesses
Another thing that means cost per action isn’t for everyone is the fact that publishers of these kind of ads will usually only accept sites with a provable track record of actually converting visitors to people who sign up or buy. If you are unable to do this, you can start off with pay per click instead and build up that track record, then think about doing cost per action later on when you are a better prospect for publishers.
Cost per action is well worth getting your head around now, whether you think it is right for you at this point in time or a good thing to keep in mind for the future!