Cost per action (CPA), also sometimes misconstrued in marketing environments as cost per acquisition, is an online advertising measurement and pricing model referring to a specified action, for example, a sale, click, or form submit (e.g., contact request, newsletter sign up, registration, etc.).
Direct response advertisers often consider CPA the optimal way to buy online advertising, as an advertiser only considers the measured CPA goal as the important outcome of their activity The desired action to be performed is determined by the advertiser. In affiliate marketing, this means that advertisers only pay the affiliates for leads that result in the desired action such as a sale. This removes the risk for the advertiser because they know in advance that they will not have to pay for bad referrals, and it encourages the affiliate to send good referrals.
Radio and TV stations also sometimes offer unsold inventory on a cost per action basis, but this form of advertising is most often referred to as "per inquiry". Although less common, print media will also sometimes be sold on a CPA basis.
CPA as "cost per acquisition" CPA is sometimes referred to as "cost per acquisition", which has to do with the fact that many actions which advertisers are optimizing towards are about acquiring something (typically new customers by making sales), although this has led to confusion in the marketing industry as to the correct meaning of CPA. Adding to the confusion, "cost per acquisition" may be used where it actually is customer acquisition cost (CAC).
Formula to calculate cost per action
Cost per action (CPA) is calculated as the cost divided by the number of actions being measured. So, for example, if the spend is $150 on a campaign and the actions attributed to this campaign is 10, this would give the campaign a cost per action of $15.
Pay per lead
Pay per lead (PPL) is a form of cost per acquisition, with the "acquisition" in this case being the delivery of a lead. Online and Offline advertising payment model in which fees are charged based solely on the delivery of leads.
In a pay per lead agreement, the advertiser only pays for leads delivered under the terms of the agreement. No payment is made for leads that don't meet the agreed-upon criteria. The service provider company can use multiple methods to bring traffic to a landing page designed to generate lead with validation and tracking system to make sure the client gets authentic valid leads.
Leads may be delivered by phone under the pay per call model. Conversely, leads may be delivered electronically, such as by email, SMS, or a ping/post of the data directly to a database. The information delivered may consist of as little as an email address, or it may involve a detailed profile including multiple contact points and the answers to qualification questions.
There are numerous risks associated with any Pay Per Lead campaign, including the potential for fraudulent activity by incentive marketing partners. Some fraudulent leads are easy to spot. Nonetheless, it is advisable to make a regular audit of the results.
Differences between CPA and CPL advertising
In Cost Per Lead campaigns, advertisers pay for an interested lead (hence, cost per lead) — i.e., the contact information of a person interested in the advertiser's product or service. CPL campaigns are suitable for brand marketers and direct response marketers looking to engage consumers at multiple touchpoints — by building a newsletter list, community site, reward program or member acquisition program.
In CPA campaigns, the advertiser typically pays for a completed sale involving a credit card transaction.
There are other important differentiators:
CPA and affiliate marketing campaigns are publisher-centric. Advertisers cede control over where their brand will appear, as publishers browse offers and pick which to run on their websites. Advertisers generally do not know where their offer is running. CPL campaigns are usually high volume and light-weight. In Cost per lead campaigns, consumers submit only basic contact information. The transaction can be as simple as an email address. On the other hand, CPA campaigns are usually low volume and complex. Typically, a consumer has to submit a credit card and other detailed information.
PPC or CPC campaigns
Pay per click (PPC) and cost per click (CPC) are both forms of CPA (cost per action) with the action being a click. PPC is generally used to refer to paid search marketing such as Google's AdSense or Google Ads. The advertiser pays each time someone clicks on their text or display ad.