When it comes to marketing your online business, your return on investment (ROI) is crucial to your success.
Take digital advertising. After pouring hard-earned marketing dollars into Google or Facebook ads, you must earnestly optimize your campaigns – testing, tweaking and hoping that all of your clicks eventually turn into sales.
Once you factor in gross profit margin, shipping costs, and other expenses, it’s difficult to maintain a strong enough return on investment to scale your marketing efforts.
What if instead of focusing your digital ad spend on “awareness-metrics” like impressions and clicks, you could spend your money only on real business results – leads, conversions, and sales?
This is where CPA marketing comes in.
CPA marketing just might be the most scalable and ROI-positive way to monetize your website.
Unlike other marketing tactics where you pay to advertise your brand with no guarantee of sales, CPA marketing allows you to only pay after the sale occurs at a rate you determine.
For example, if you’re selling a $100 pair of sneakers and you pay your CPA partners a 10% commission after the sale, you only pay $10 in marketing spend and enjoy a return on ad spend (ROAS) of 10:1.
That’s a substantial return.
Additionally, these affiliate customers are known to spend 58% more annually than the aggregate of all other advertising channels.
This beginner’s guide is going to walk you through how CPA marketing works and will cover:
- What is CPA marketing?
- How does CPA work?
- CPA marketing payment model.
- Benefits of CPA.
- Top CPA affiliate networks.
- BONUS Tips to better your CPA strategy.
What is CPA Marketing?
CPA marketing, also known as cost per action marketing, is a style of the affiliate marketing model that offers a commission to the affiliate when a specific action is completed.
The lead action can be anything from making a purchase to getting a quote, watching a video, or filling out a form.
Ecommerce sites around the globe can leverage CPA marketing to create different offers and online marketing campaigns.
CPA networks then promote these campaigns through affiliates.
The CPA affiliates are paid a set fee each time a referred visitor completes the action or offer.
How Does CPA Marketing Work?
The CPA model is a simple concept once you break down into how it works and who’s involved.
- Affiliate or Publisher: The influencer (blogger, brand, business) that promotes a business or product in order to drive traffic to the ecommerce site and make a specific conversion.
- Business or Advertiser: The brand that desires a partnership with an affiliate to drive quality traffic to the business’ website and increase sales, generate leads, or boost conversions.
- CPA Network: The platform that brings together the affiliate who wants to make money by promoting products and the businesses that want their products promoted.
Let’s say a popular cooking blogger named Lisa (our affiliate in this story) has a healthy following of YouTube subscribers and blog readers.
She learned how to start a blog to make a living in her kitchen—trying new recipes and recommending specific brands and products to her audience.
After developing a guest blogging strategy, increasing web traffic, and building a cult following, her cooking crowd is eager to buy the next kitchen gadget she recommends.
Then we have our example business, EasyCooking.
EasyCooking manufactures high-quality kitchen gadgets – from cutting boards and measuring cups, to professional mixers and food processors. They’re looking to expand their marketing reach and would love to take advantage of Lisa’s audience of budding chefs.
A CPA marketing network brings Lisa and EasyCooking together.
Ecommerce businesses like EasyCooking utilize CPA networks to find and partner with influencers like Lisa.
Influencers like Lisa, who want to make money doing what they love and engaging their audience, can turn to CPA networks to find companies that want to pay her to use and promote their products.
Lisa sends her audience to the business’ website and makes a commission on each sale or lead conversion.
In turn, EasyCooking makes money from Lisa’s referral traffic.
The network brings them together and the audience gets to try new products and learn about emerging brands. It’s a win-win.
CPA Network Terminology
CPA network terminology isn’t complicated, but there are a few key terms you should know as you launch.
- Affiliate Manager: A person who manages an affiliate program for a merchant. They are responsible for recruiting, engaging with affiliates, and generating revenue for the merchant.
- Category: The niche for which the CPA offer applies (sports, fashion, beauty, health, etc).
- Chargeback: When a sale “falls through” for an action an affiliate has already paid for. Since the sale was never finalized or an item was returned, the previously given commission is deducted back into the advertiser’s account.
- Commission: The payment an affiliate receives—either a flat rate or percentage—once a successful conversion is tracked.
- Contextual link: A text link placed within an affiliate website that links to the advertiser’s website.
- Conversion rate: The percentage rate at which a particular action is performed. In other words, the number of successful conversions divided by the total traffic.
- Cookies: In affiliate marketing, cookies are used to assign a unique ID to a user who has clicked the affiliate link to an advertiser’s site for a specific duration. The affiliate will receive credit for the conversion in this predefined window, typically 30-90 days.
- Cost per action (CPA): An online advertising strategy that allows an advertiser to pay for a specified action from a target customer.
- Earnings per click (EPC): The average amount an affiliate earns every time a user clicks an affiliate link.
- Offer page: The webpage where the conversion occurs after a visitor takes the required action.
- Return on investment (ROI): Refers to the amount of money made with a campaign. It is the revenue divided by the ad spend, multiplied by 100.
CPA Marketing Payment Model
The CPA affiliate marketing method is advantageous for businesses because they don’t pay unless a successful conversion is made.
The payouts differ based on competition and average commission rates in each vertical.
For example, headphone manufacturer Skullcandy’s successful affiliate program offers a 5% commission on sales based on a competitive electronics category.
Kelty, the outdoor camping gear company, provides affiliates up to 10% on a tiered commission structure. It’s all based on the competition within your vertical.
The cost per action formula is a very low-risk method for advertisers, as they only pay for the desired actions after they occur; unlike paid traffic, for example, where you just pay to get people on your site through ads.
The cost per action for an advertiser can be determined by dividing the total cost of the marketing campaign by the number of successful actions taken.
Let’s look at our pretend company, EasyCooking, as an example.
If EasyCooking spends $1,000 on a marketing campaign and gains 25 successful conversions on a signup form for a recipe ebook, the cost per action is $40.
While the cost per action varies by industry, Google AdWords reports the average cost per action across all industries is $48.96.
- The automotive industry has the lowest CPA at $33.52.
- Technology has the highest CPA at $133.52.
The top 10 percent of advertisers boast CPAs up to five times better than the average.
What are the Benefits of CPA Marketing?
CPA marketing is very profitable when you target the right audience (as an affiliate) and connect with quality influencers (as a business).
Compared to other ecommerce marketing channels, the cost per action formula offers a number of benefits, including:
1. Easy to set up.
CPA marketing is easy to launch: you only need a website and a CPA network.
It takes very little capital upfront to use this marketing technique.
When you partner with a trusted CPA affiliate network, there’s no guesswork as to how to get started.
By using your own website and choosing a CPA offer, you can begin getting traffic from affiliate sites almost immediately.
2. Pay After the Sale.
You’re not paying for traffic that doesn’t convert.
If an affiliate’s referrals continuously offer low-rate conversions, diversify your affiliates and shift your focus to a more successful influencer.
3. Low Risk.
Because no payment is made to the publisher unless a referred visitor converts to a customer or completes a specific task, the risk is low for ecommerce businesses.
There are tools like Mentionlytics that help you monitor how the affiliate is marketing your brand or product, but cost per acquisition marketing doesn’t call for an immense investment of time or capital.
4. High ROI.
Affiliate marketing generates 16 percent of all online marketing.
CJ by Conversant’s Affiliate Customer Insights reveals that customers spend more money when making a purchase off an affiliate’s recommendation.
This means these types of marketing campaigns drive a better quality of traffic and offers a better value than most traffic sources.
Affiliate marketing produces:
- 58% higher average customer revenue.
- 31% higher per customer order average.
- 21% higher average order value (AOV).
Plus, the more sales you drive, the higher your commissions can be. For instance, the BigCommerce affiliate program starts at a 200% bounty payment and goes higher based on sales volume.
5. Expand Marketing Reach.
CPA marketing gives you scale and distribution.
You get to scale your brand message faster and more consistently to the largest possible audience.
Whether your brand is in fashion, electronics, home and garden, pet supplies, beauty, or almost anything else, most business verticals use CPA marketing.
Take Bliss, a skincare and beauty product line, for example.
Their affiliate program provides a 10% CPA payout on all sales.
Now beauty influencers, bloggers, and media sites have the tools to easily promote them, receive a 10% commission on all sales, and expand their affiliate marketing reach.
In every vertical, there’s almost always an affiliate website available for partnerships through a CPA affiliate network.
Spread your brand awareness by reaching the affiliate’s audience—a group you may have never otherwise reached.
CPA Marketing Tips & Best Practices
CPA affiliate marketing is not a “set it and forget it” method.
You must invest the time to cultivate a relationship with your CPA affiliates to create a strong conversion funnel to keep improving your conversion rates.
To drive success through your CPA marketing strategy, try these tips:
1. Consider hiring an Affiliate Manager.
To get the most out of your CPA marketing efforts, you need a dedicated in-house resource – a person who can recruit new CPA affiliates, engage with website owners, send them new promotions, and drive consistent revenue for your site.
Affiliate Managers can provide help for affiliates by taking the following actions:
- Review affiliate offers and provides insight into strategic changes.
- Offer insight on what types of affiliate links or ads to use to optimize conversion.
- Provide tips on content that will effectively promote the merchant’s products.
- Send product updates and new creative to CPA affiliates.
- Provide commission bonuses and incentives for high-performing CPA affiliates.
Affiliate Managers can provide help for advertisers by taking the following actions:
- Connect you with and recruit the top-performing affiliates in your niche.
- Brainstorm new promotional ideas for particular products.
- Send consistent brand messages and product updates to the CPA network.
- Negotiate contracts with affiliates, oversee ROI, and compare your affiliate program to others to stay competitive.
- Guide you with creatives that partner well with the best affiliate programs and websites.
- Deal with taxes and set up your accounting services.
2. Avoid CPA networks with bad reviews.
The downside to CPA marketing (as with any online money-making opportunity) is the questionable networks that have shady practices.
Before you jump on board with any CPA affiliate marketing network, read the reviews.
Odigger offers network reviews so you know which are worth your time and which to avoid.
Click on the Network Reviews tab and search for the one you’re interested in to see what others have to say.
Keep in mind that no network will have a 100 percent satisfaction rating, so one or two complaints shouldn’t scare you off.
The most popular negative reviews topics include:
- Lack of payment (please note that even highly reputable CPA marketing networks may withhold payment for specific reasons, so review the network’s policies before signing on).
- Unhelpful affiliate managers.
- Difficulty signing up for network or using the platform.
3. Utilize Native Advertising.
The days of embedding ugly, in-your-face banners across the header of your website are over.
It doesn’t take blaring advertisements to convert customers.
In fact, native ads, or those that resemble your website’s color, layout, and theme, are among the marketing trends to watch in 2020.
- Nonsocial native spending will grow more than 80 percent this year to $8.71 billion.
- Seventy-seven percent of all mobile display ad dollars will be spent on native placements.
- eMarketer predicts native advertising will make up nearly 60 percent of display spending in 2018 in the US.
Integrating your advertising into a high-quality web design will offer more conversions, as native ads result in two times more visual focus than banner ads.
The Top CPA Affiliate Networks
As we discussed earlier, CPA affiliate networks with bad reviews should be avoided, but there are some bright spots when it comes to reputable networks.
Platforms that provide knowledgeable affiliate managers, numerous offers, and competitive payouts are the ones to try.
Reputable CPA affiliate networks include:
Max Bounty offers trained affiliate managers who focus on a merchant’s marketing needs.
There are nearly 20,000 affiliates on the platform, and the affiliate managers are knowledgeable of which partners will be the best fit for businesses and affiliate marketers.
The affiliates are vetted and offer high-quality traffic to the merchant’s site.
Newbies to MaxBounty have access to a plethora of training material and the program offers weekly payouts.
Clickbooth has been around since 2002 and places a strong focus on making its program easy and innovative for merchants.
Clickbooth claims its artificial intelligence technology can provide up to 25 percent increased earnings per click (EPC) for affiliate partners.
There are no costs to join Clickbooth as an advertiser.
Advertisers can view traffic performance from each individual affiliate, and if they desire, can manage budgets, payouts, schedules, and campaigns themselves or allow the Clickbooth team to handle the work.
Launched in 2009, Peerfly is a small affiliate marketing company.
PeerFly offers to match or pay even more than any other affiliate network.
The network offers free training for affiliates and payouts weekly, bi-weekly, or monthly through PayPal, Amazon gift cards, checks, bank wire, Payoneer, and Bitcoin.
Admitad has more than 520,000 publishers and more than 1,200 advertisers.
This network was launched in 2009 in Germany and hosts international offers, giving it a large footprint across ecommerce businesses.
Admitad boasts a client-oriented approach with personalized training and other learning options.
Affiliates only need a $10 minimum for payouts and can be paid via PayPal, epayments, and wire transfer.
The network offers anti-fraud technologies, cross-device tracking, and deep linking options.
W4 reviews publisher applications before approving their accounts.
The publishers can boost their revenue by referring others to this network.
W4 has a dedicated support team to help affiliates and merchants and offers a rewards program for the highest-earning affiliates.
CPA Marketing Trends
Following the hottest CPA marketing trends in 2020 will increase your revenue and help create a strategic approach for next year’s digital marketing plan.
- CPA marketing is expected to expand to developing countries in 2020 and beyond.
- CPA marketing should have a focus on copy rather than pop-ups and headlines.
- Influencer marketing will begin to overlap into CPA marketing, giving many new ecommerce businesses even more reason to join CPA affiliate networks.
- Ecommerce businesses will shift a portion of their budget from traditional marketing (PPC, social media, and banner ads) to affiliate and performance marketing.
Reliable CPA affiliate marketing networks will continue to increase transparency and offer the data-driven information that clients demand.
CPA marketing is the next step in digital marketing that ROI-minded marketers are looking for.
It’s a fast-paced and optimization-friendly cooperative tactic that puts real business results at the forefront.
It’s a way to scale and distribute your brand message while building strong relationships with partner websites.
This customizable, easy-to-launch strategy is also a win for the affiliates, as they can choose offers that mirror their own brand and website, allowing them to monetize content on their site with banners and contextual links.
If you want to expand your website’s reach, maintain a strong return on investment, and feel a real business impact, incorporate CPA marketing into your strategic plans.