With the Cost per Action payment model, the advertiser only pays if the user carries out a previously defined action (e.g. the purchase of a product).
Cost per Action in Online Marketing
Cost per action means ‘costs per action’, and it is a payment method in which the advertiser only incurs costs when users perform a specific action on the landing page. This conversion can be any number of different actions, e.g. the purchase of a product, the subscription to a newsletter or the download of an e-paper.
CPA vs CPC
In contrast to the Cost per Click billing method, payment is only due when a user converts – and not when he or she clicks on an ad.
Cost per Action vs Cost per Acquisition
Cost per acquisition (CPA) refers to a billing method that is only applied after a purchase has been made. You can read more about this in our article on cost-per-order.
Advantages of the CPA payment method
The CPA option offers a transparent cost structure, in which each conversion costs a previously agreed-upon amount. Thus, this payment model minimises the risk for the advertiser and offers high profitability.
Because it is only actions that are taken on the website which incur costs, it is easier for website operators to evaluate the campaign. The data collected by web analysis tools such as Google Analytics can be used to analyse campaign performance without there being any need to rely on the data provided by advertising networks.
Disadvantages of billing using cost per action
CPA campaigns tend to have a higher base price than models in which payments are made for clicks as opposed to conversions. This is what one would expect, as users who convert as opposed rather than just click on a banner are of much greater value.
CPA in Google AdWords
Google offers a strategy via the AdWords platform called ‘Target CPA’. It is important to read the fine print here: this strategy is not CPA accounting in the true sense, but rather a means of optimising CPC costs and conversion profits. You can find out more about this in Google’s AdWords Help.
What role does cost per action play in search engine optimisation?
Following a strict interpretation of the role played by SEO, CPA does not play a role: site users arrive via paid search, as opposed to organic search. Whether a visit results in an action being taken, however depends on what happens on the website. In this sense, therefore, the return on investment of cost-per-action campaigns can certainly be improved through search engine optimisation.
Conclusion
The cost-per-action billing method can be an interesting remuneration model. However, by linking the costs to the conversion, website operators have to take a close look at how the target page is structured and how it performs.
