CPA and CPM Can Coexist
Cost per action was the solution, firmly placing the power in the hands of the marketer. This is the companion headline to the "CPM is dead" message that was bouncing around the press six months ago.
It is not CPA vs. CPM. It is CPA and CPM.
If Ford Motor Co. launches a new car, its nationwide campaign will have various goals. Its CPM-based advertising would raise awareness and establish the car as a desirable vehicle to own. The CPA campaign would develop a newsletter membership for previous Ford car owners, new market prospects who were in the market for a replacement vehicle and car buffs and influencers who want to know more about the new alloy engine. The newsletter would guide them through a steady communication leading through to a car purchase.
CPM pricing is built for brand-building and awareness while CPA is for direct response. You do not want to take your CPM-driven sales force and provide those salespeople with a fallback position to sell CPAs. Dedicate a portion of your sales team or outsource it, as selling direct response is a different beast from impressions and sponsorships.
The conflict is no different from business reply cards in a magazine. The traditional advertisers pushed back because it added clutter or covered their impressions. The publishers viewed it as incremental revenue beyond their traditional advertising sales. The market selected the outcome and BRCs continued in favor, supporting direct response through print media. A good CPA business is the equivalent online of BRCs, getting a user to engage and respond to an offer. Marketers get a consumer at heightened interest, the process is smooth through to order fulfillment and the user enters seamlessly into the marketer's database.
CPA is the solution, but it is a balanced solution between the publisher and the marketer. Bad offers cannot get distribution and good offers that are effectively delivered to the right user make money for the publishers and create a high-quality lead for the marketer. It takes homework for the publisher, but long term it is a sustainable and valuable connection. Marketers acquire profitable customers and partners make money. The homework can be outsourced to a number of firms whose entire business is based on lead acquisition on a CPA model.
The only way that marketers acquire the right customers and partners make money is that they both work it. This means opening back-end performance metrics for the marketers, revealing what works and what does not from past campaigns and testing creative and copy while putting the right offers in front of the right audience. The partners need to put in the work to get the distribution channel working properly. It is frequently not as simple as throwing a women-skewed offer on iVillage. It requires work to understand deeper correlations and motivated audiences that respond well to certain offers.
In many cases, CPA opportunities do not compete head-to-head with the CPM sales force driving large publishers' advertising sales. CPA can unlock untapped revenue streams, occupying registration pages, confirmation pages, error pages, pop-ups and solo e-mails. It is apples to oranges, and the savvy operators look over their site with a keen direct marketer's eye to turn every conceivable action into dollars.
Many in the industry are amazed, watching the rate for targeted CPM ads drop to less than $1 on top-brand Web sites. It makes sense to keep your score card on CPA with an overall effective CPM (e-CPM). This will tell you whether you need to change either your offers or their placements, or whether you have the right offer at the right time on your site. In the limited cases where the use of CPA competes with impressions and sponsorships, the bar needs to clear to an eCPM that fits the economics of the publisher.
Wave one of CPA put all of the advantage with the marketer acquiring new leads and customers. CPA version 1.0 was to the chagrin of publishers averse to the pay-for-performance model. With the dramatic shift of the Internet during the past 12 months, pay-for-performance has become a substantial revenue stream for some of the largest sites that truly get it. We are now at CPA version 2.0, which recognizes the balanced effort between the marketer and the publisher needed to unlock this revenue stream.
Direct response and awareness can and do co-exist in the traditional world and the message is clear in 2001 that they will do exactly the same thing on the Internet.
This business is not simple. CPA goes beyond the passive viewing of a graphical advertisement. You are asking someone to respond, to raise her hand and express interest in a product, service, newsletter or book club. Offers need to be strong.
The more sophisticated marketers are covering many channels and mediums to access, motivate, sell and retain their customers. The best retailers are multichannel, effortlessly moving from an online registration, to a catalog by regular mail and cross-promoting an in-store offer while motivating a consumer to keep in touch with future promotions through an e-mail newsletter.
CPA is a natural fit that complements awareness-based advertising campaigns. A consumer tries on a sweater from the J.Crew store, resupplies socks through jcrew.com and buys gifts through the holiday catalog. Getting permission from existing and new customers is not trivial and the right partner can do the heavy lifting to find the right customers, deliver offers and provide fulfillment services that are trackable and scalable for the ever-changing Web.
CPA is a great equalizer. CPM places the risk on the marketer and CPA strikes an equal balance among the marketer, consumer and distribution partner. A marketer cannot acquire new customers if its offer does not economically make sense for a publishing partner. CPA, like CPM, requires specialization and a focused selling effort combined with a scalable technology infrastructure. Achieving scale for both marketers and publishers is the name of the game.
CPA is the future. Direct response on the Internet will live right along with advertising, just as it does in the real world.