If you’re like most advertisers, you’ll probably stick to the one standard model of performance marketing that you’re most familiar with. For example:
- CPA (Cost Per Action)
- CPS (Cost Per Sale)
- Revenue Share
There is nothing wrong with these models. However, if you’re limiting yourself to only one of them, then you’re probably leaving a lot of money on the table. What works best with one campaign might not work as well with another.
If you want to generate the maximum ROI possible, then you need to test the different ways of acquiring, converting and monetising your traffic. So, let’s compare two of the major models, to show you some of the core pros and cons.
CPA vs. CPL – What’s The Difference?
CPA stands for Cost Per Action, and is essentially a model where leads are only paid for if they complete an action – such as buying a product.
CPL stands for Cost Per Lead, and is a model where leads are qualified into genuine prospects before being sold.
So what’s the difference?
Instant Gratification vs. High Ticket Deals
With a CPA model, the conversion happens immediately. The sale is made, and the advertiser or affiliate gets paid. This works great if you are advertising a high-volume low-cost product or service.
With a CPL model, the first actual exchange of money between the prospect and the lead buyer could be many months away. But when it converts, it will probably be a very profitable conversion.
Forced Sales vs. Lifetime Value
A good advertiser with an aggressive funnel can probably force the sale of almost anything. But in almost all situations, a forced sale seriously reduces the overall LTV (Lifetime Value) of a lead.
Switching to a CPL model helps to build a stronger relationship with the potential customer, and can create leads that are packed with plenty of long-term value. Even with low-ticket items, a CPL model can sometimes be the better option, simply because repeat sales compounded over time can become a strong source of income.
Using a CPL model means you can charge more for your leads. Or, if you’re buying leads using a CPL model, it means you will likely generate a slow-growing, but loyal and repeat stream of revenue.
Lecture vs. Conversation
When you operate a CPA model, you are essentially bombarding prospects with messages until they either bounce off the page, or give in and buy something. They have no input on what these messages say, and it is a very one-way communication method.
With a CPL model, however, you’ll be opening up a channel of real, two-way communication. Feedback from your prospect will help you to not only build a very targeted prospect list, but you will also find out more about what they like and dislike, allowing you to tweak and fine-tune your products, services, and overall marketing strategy.
So Which Approach is Best?
It might sounds like we're saying CPL is best, but we’re not. Both models have their merits, and both have their moments to shine. It might seem like a CPA model is a one night stand, whereas a CPL model is a serious and committed relationship. And in a sense, this is true. But we have found that using a mixture of CPA and CPL can really boost campaign results, especially if we monitor the results and optimise the appropriate campaigns.
If you’d like a hand optimising the way you integrate a powerful combination of CPL and CPA across your existing campaigns, drop us a line right now.