What is CPA Marketing?
CPA Marketing is a type of affiliate marketing commission model. CPA in the world of affiliates stands for “Cost Per Action”. In essence, an affiliate earns a commission when they send a referral/lead to a brand and the referral takes a particular action that then qualifies the affiliate to be rewarded. The action can be as simple as providing an email address or signing up, however, the action required is generally a sale or purchase.
It’s important to note from the get-go that sometimes CPA is referred to as “Cost per Acquisition”, however, this is not entirely accurate when it comes to affiliates, and it more relates to a general marketing term which refers to the effective average cost to acquire 1 new customer. The cost per acquisition will factor in things like marketing costs, infrastructure, admin costs, and anything else that contributed to the overall cost of gaining a new customer. As an affiliate or CPA marketer, you will be interested in both CPA (Cost per Action) i.e., the commission you will earn as well as the CPA (Cost per Acquisition) as this will help you determine your ROI. Remember that profit is income minus costs.
In this article, we are going to explore CPA Marketing, what it involves, key terminology, and more.
CPA Marketing – How Does It Work?
As mentioned at the beginning of this article, we briefly explained what CPA marketing is, but in order to understand CPA marketing and how it works, it is first important to understand the stakeholders or players involved in the process and what each of their roles entails.
Publisher or Affiliate: This is a person or business that markets or promotes the products or services of a 3rd party company (merchant) by driving traffic to their offers with the aim of earning a commission when a sale (or action) takes place. The publisher or affiliate generally uses a variety of online marketing tactics to attract the potential target market and then refers them to the merchant. The publishers and affiliates are not employed by the merchant, and they never deal directly with the merchant but instead, they work through an intermediary who manages the process. The intermediary is the affiliate program or affiliate network.
Merchant or Advertiser: This is a brand that has products and or services and utilizes the services of an affiliate program/network to attract more customers. The merchant/advertiser aims to generate leads and increase sales. The merchant is usually a separate entity to the affiliate program; however, some companies do set up and manage their own affiliate programs. In most cases, though, they outsource this to a dedicated affiliate program or CPA network.
CPA Network: This is an intermediary company that specializes in affiliate marketing and acts as the intermediary between the affiliates and the merchant. The CPA network is responsible for providing an affiliate platform or portal which also tracks the performance of the affiliate marketers. The CPA network usually works with many advertisers and makes various offers from all the advertisers available to the affiliate base. The CPA network manages the entire affiliate relationship from onboarding new affiliates, negotiating terms, tracking performance, paying commissions, providing support, and more.
So How Does CPA Marketing Work?
Now that you have a clear understanding of the various stakeholders, the best way to explain how CPA marketing works is with an example:
For this example, SupaFX is the advertiser. SupaFX is a forex broker that provides online forex trading services. SupaFX wants to acquire more new clients that will become active traders on their platform. SupaFX realizes that on their own, they do not have the knowledge or resources to build and manage their own affiliate program, so they start looking for a CPA network to partner with.
We then have Algo-Affiliates that is a renowned CPA network that specializes in working with forex brokers. Algo-Affiliates has thousands of affiliates that work with them and they have an advanced affiliate platform that allows for tracking the performance of affiliates, plus it’s packed with marketing materials, analytics, and tools.
Finally, we have Joe who owns a blog all about finance and forex trading. Joe’s site is packed with great information, and he gets plenty of visitors every day to the site and he has loads of social media followers. Joe wants to make money from his blog and is interested in working with a CPA network.
The collaboration begins…
SupaFX decides they want to partner with Algo-Affiliates. Algo-Affiliates assigns an account manager to manage the relationship with SupaFX. Together they identify what offers and promotions that SupaFX will provide, the commissions (CPA) they can afford to pay for each new client, and more. Algo-Affiliates then sets up all these offers on their platform; they load up banners, landing pages, email templates, and more. When the offer is ready to go live, Algo-Affiliates notifies all their affiliates about this new and amazing brand called SupaFX. Then we have Joe, who signs up with Algo-Affiliates. Joe sees the new SupaFX offers and decides he is going to advertise SupaFX on his blog and to his social media followers. The CPA offer from Algo-Affiliates is $250 for every new client that Joe sends to SupaFX, which deposits at least $100 into their SupaFX trading account. The new clients are called FTDs (First-time depositors)
Joe logs into his Algo-Affiliates account and from there he is able to get marketing materials, such as banners. The link of the banners has a unique code in it which is linked to Joe’s account. Each time someone clicks on the banner, it is recorded to Joe’s affiliate account. Joe picks some banners and puts them on his blog. Visitors to Joe’s blog see the banners and click on them. They are redirected automatically to SupaFX. Some of the people simply browse the SupaFX website, some register and don’t trade and some of them make a deposit and trade. Each time one of Joe’s referrals deposit and trade, he gets awarded a CPA commission. Joe can track his performance anytime by simply logging into his Algo-Affiliates account, where he can also view things like the number of sign-ups, FTDs, and how much commission is owed to him.
At the end of the month, Algo-Affiliates checks with SupaFX that all the referrals that Joe sent are legit, didn’t have chargebacks, etc. Algo-Affiliates then sends Joe a commission payment for all his FTDs.
In a nutshell, that is the basic flow of how CPA marketing works. It obviously entails a lot more than this as Joe may use various other CPA marketing tactics besides just using banners. Joe may choose to advertise through advertising networks or run PPC campaigns, post videos on YouTube, and much more.
CPA Network Terminology
The terminologies of CPA Networks aren’t complicated. Here some key CPA marketing terms you should know:
Niche/Vertical: This is the category of offers that the CPA marketer will promote and earn a CPA commission for. This could be fashion, health, beauty, sports, finance, gambling, etc.
Affiliate Manager: Someone who helps manage an affiliate program/network. Their duties include recruiting, engaging, and dealing with the affiliates. They are essentially the account manager for affiliates and publishers.
Commission: This refers to the payment received by an affiliate once there is a successful conversion. This could be a percentage or a flat rate or a hybrid of both. CPA commissions are typically a once-off payment.
Chargeback: This occurs when a sale is reversed by the purchaser. The person gets their credit card company to cancel the transaction. In this case, the CPA fee due to the affiliate is deducted from their commission earnings.
Contextual link: Contextual links are text links placed within the text on a website. The link redirects typically to the website of the advertiser.
Cookies: For affiliate marketing, cookies help in assigning unique IDs to users that have clicked the link that directs them to the site of an advertiser for a specific period.
Conversion rate: This refers to the ratio of sign-ups to the total number of successful conversions. This is a vital metric for measuring performance.
Offer or landing page: This refers to a webpage where the advertiser promotes their product or service. This sales page is designed in a manner that encourages the visitor to take action, such as buying the product.
EPC –Earnings per click: The average amount earned by an affiliate each time an affiliate link is clicked by a user. For example, the affiliate was able to get 10,000 clicks on their banners, which resulted in commissions earned to the value of $1,000. In this case, the EPC would be $1,000/10,000 = $0.1.
ROI – Return on Investment: This is the efficiency or profitability generated from a campaign. It can be calculated by finding the quotient between the revenue generated and the amount spent (expenses) on the campaign. It is typically expressed as a percentage.
Best Tips and Practices for CPA Marketing
CPA marketing isn’t something you don’t pay attention to. Investing your time and effort to build a strong relationship with your affiliates is vital to helping your conversion rates become better.
You can try the tips below to achieve success via your CPA marketing plan:
Make Use of Native Advertising
Native advertising is one of the best ways to achieve success in CPA affiliate marketing. Native ads or those that look like the color, theme, and layout of your website are some of the marketing trends you should watch out for.
It is time you stopped attaching ugly, in-your-face banners across your website’s header. Incorporating your ad into a high-quality web design will provide more conversions. Native ads give more visual focus than banner ads do.
Advantages of CPA Marketing
CPA marketing can be highly lucrative, especially when done correctly, by focusing on the right audience and presenting them with ideal offers. CPA marketing is a science and through a process of testing and optimization, the ROI of campaigns can be increased to optimal levels.
Some benefits of CPA marketing for advertisers include:
Lower Risk for Advertisers
The risk for the advertiser/merchant businesses is lower since they only pay for verified conversions. The advertiser does not incur marketing costs or the possibility of failed marketing campaigns as these costs are the responsibility of the publisher.
Expanded marketing reach
With CPA marketing, the advertiser can scale up their marketing faster and to a larger audience through the CPA network. This advertiser does not need to invest in additional human resources to manage its own affiliate program. The CPA network handles all of this.
Some benefits of CPA marketing for affiliates include:
Variety and Lower Cost
CPA marketing allows for CPA marketers, i.e., affiliates and publishers, to earn commissions from 3rd party companies’ products and services. This means they don’t need to create a product, layout large amounts of capital, or support the product. CPA marketers can simply focus on their marketing efforts and earn a referral fee.
When CPA marketing is done efficiently and effectively the ROI can be substantial. Many publishers and affiliates earn millions of dollars per year with CPA marketing.
How to Get Accepted into CPA Networks
This is the first question people ask when they realize they have to apply to join CPA networks. There are ways to increase your chances of being accepted into these networks. It is important to know that even when you don’t get accepted, you can try again or try with other CPA networks.
Build a Website or Blog
Though without one, you can still get accepted into some CPA networks, your best chance of success is having a website. Nowadays there are plenty of website builders and CMS solutions that do not require any technical skills to build a quality site. With some basic drag and drop features, you can have a site up and running in minimal time. You should register your own dedicated domain for your site.
Include an Email having your Domain
It will be great to use an email that includes your domain name. CPA marketing networks usually reject applicants using free email addresses. This is because they feel these emails can be created easily and there’s no proof to show that you own the site.
Be Honest in your Conversations
While some selective CPA networks might not accept you because of your honesty, this is an important virtue, especially in this area. If you claim that you can drive 1000 targeted leads from PPC per month and they realize you can’t even use PPC, this is most likely to disqualify you.
You might think that telling them you can do everything you are asked to will help you, it might actually disqualify you. CPA networks often provide you with a relationship manager that can help you in some areas you are lacking. Therefore, it is important to be honest.
Be Proactive when Applying
The majority of CPA networks will ask to interview you through an instant messenger or over the phone before accepting you. It can sometimes take a day or two before they reach out to you. If their website provides a phone number, you can reach out to them first. Also, use the opportunity to ask them questions, remember this is a mutually beneficial relationship, so you also want to interview them and see if this is the CPA marketing network for you.
CPA marketing has been around for many years. Many people earn a good living just by promoting CPA offers. CPA marketing is a vast and complex field with hundreds of different marketing tactics and techniques that can be used to generate traffic. This article has introduced you to the exciting and lucrative world of CPA marketing. Get started now and join Algo Affiliates, and soon, you can start earning great commissions!