Rick Crosby, MarketingWebtraffic.com's CEO
How to Track Online Marketing ROI Using Cost-per-Action
As the online advertising market is poised to grow nearly
$10 billion over the next six years, it's essential that we remember the
importance of measuring the effectiveness of that spending.
There's no point undertaking any marketing or advertising campaign
unless you can measure its results. And results are best measured in terms
of return on investment (ROI).
Unfortunately, in the world of marketing and advertising, many businesses
seem to be losing touch with their general objectives. The tools may have
changed, but the principles remain the same - Your advertising campaigns
are only successful if they meet the objectives you set out to achieve.
So if you're after increased sales, you need to measure the cost of each
sale generated to determine your return on investment.
Fortunately for advertisers, tracking ROI for online advertising is much
easier than it is for traditional forms of advertising, such as TV, Radio,
Newspaper, Magazine, and Billboard. When you market online, every advertising
campaign can be tracked and measured all the way down to the penny. This
is why more and more advertising dollars are being spent online every
Why Not Cost-Per-Click or Cost-Per-Impression?
When it comes to tracking campaign effectiveness, many businesses rely
on Cost-per-Click (CPC) and Cost-per-Impression (CPM) statistics. But
what many people forget is that for most businesses, clicks and impressions
don't earn you money. So by tracking clicks and impressions, you're not
really tracking return on investment. The same is true of page stats.
If you're like most businesses, impressions, clicks, and page views are
simply a means to an end. (In fact, without corresponding sales conversions,
they're nothing more than unjustifiable expenses.) If you only earn revenue
from sales, you need statistics linking costs and sales. In other words,
you need to measure cost-per-action (CPA).
In a CPA campaign, you run an online ad on third party sites and they
charge a commission when a lead is generated or converted. It's performance-based
pricing. This means the publisher wears most of the advertising risk,
as their commissions are dependent on good conversion rates.
Perhaps the most widespread use of CPA is affiliate marketing. With affiliate
marketing, you determine what actions you will reward and how much you're
willing to pay per action. For example, you might engage an affiliate
site to promote your business. If they generate sales for your business,
you can pay them a commission. Your cost-per-action would then be the
cost per sale or lead generated.
Tips on Conversion
The following conversion tips will help you plan your CPA campaign and
avoid some common pitfalls.
1) How are sales and leads recorded?
For many businesses, the obvious result which constitutes a conversion
is a sale. If your sale is recorded or registered online (e.g. e-commerce),
it can be considered a measurable action. This means you can choose a
sale as the desired action in your CPA campaign.
Depending on the aim of your campaign, you may want to measure other outcomes
in addition to, or instead of, sales. For instance, you might measure
leads in the form of membership registrations, newsletter subscriptions,
software downloads, or just about any other activity beyond simple page
browsing. So when your customer clicks register, or subscribe, or download,
etc., the conversion is automatically registered and the details are fed
back you're your CPA campaign.
In either case, at any time, you can log in and view your campaign results
in real time.
2) Set up a landing page to capture lead contact details
If you're paying for leads, you obviously need to know when a lead is
actually generated. Generally a lead becomes a lead only when the customer
supplies you with their details (name, contact numbers, email, etc.).
This means you need to set up a landing page on your site capture these
details. Your capture page can be collect contact information or it can
be as simple as a signup for a monthly newsletter.
3) Get your CPA provider to set up your landing page
If you don't have the time, inclination, or resources to set up the necessary
forms and database on your own site, the CPA provider can do it on their
hosted server. They collect the leads and calculate the statistics. For
many businesses, this is the ideal option because it saves them time and
money, and there are no tracking discrepancies.
4) Find a CPA provider you can trust
If your CPA provider will be collecting leads and calculating statistics,
you need to know you can trust them. There are plenty of trustworthy providers
out there; you just need to find them. A trustworthy provider will find
out what your exact needs are and spend time researching your niche market
online. By performing this marketing analysis, your provider will be able
to tell you exactly how much business they can bring you on a daily, weekly,
or monthly basis. If they can't provide you with this important information,
then this is a good indication that you are not speaking with a professional
Just as importantly, with a trustworthy provider you'll be able to personally
speak with the internet marketer who will be working on your project.
This person will be an expert in the field of internet marketing, not
just a sales rep.
5) Avoiding excess fees
WARNING: Some CPA providers charge a setup fee ($2,500 to $10,000) and/or
a network fee (20% to 30%) for each sale or lead that is generated. Before
committing to a provider demanding high fees, make sure you are getting
more for your money. Most of the time high fees simply mean the sales
rep is getting a higher commission!
6) Measuring your conversion rate
The Formula for measuring CPA is by dividing the total cost per advertising
campaign by the total number of actions (conversions) that were received
from each ad campaign. For example, if your online ad campaign costs $1,000
and generates 50 sales or leads, your cost per action (CPA) is $20.00
7) Improving your conversion rate
A high conversion rate depends on several factors:
Visitor Interest Level - The interest level of the visitor is
maximized by matching the right visitor, the right place, and the right
Offer Attractiveness - The attractiveness of the offer includes
the value proposition and how well it is presented.
TIP: Small, impulse items typically have a higher conversion rate than
large shopping items.
Ease of Process - The ease with which the visitor can
complete the desired action is dependent on site usability. Important
considerations here include intuitive navigation, contact info capture
page, "Buy Now" or "Apply Now" buttons and fast loading pages.
Because CPA allows you to identify exactly how much it will cost to acquire
a customer, there's no guesswork involved. You have the ability to precisely
calculate your ROI. And because online tools and ad serving technologies
allow you to monitor effectiveness in real time, you can even tweak campaigns
while they're still running. If you can master effective online advertising,
you'll not only save thousands in implementation costs, you'll also reap
the rewards of a far higher return on investment.
About the Author:
Rick Crosby is the founder and CEO of a full-service, web site design,
internet marketing and online advertising agency, MarketingWebTraffic.com,
Inc. To contact Rick directly, please call 727-490-5739 or click