Apples And Eggplants: The Difference Between CPA And CPL Pricing Models

With the continued weakness in the advertising market, marketers are shifting their dollars into performance advertising:

In the recently released Interactive Adverising Bureau Online Ad Spending Report, David Silverman, a partner at PricewaterhouseCoopers LLP, said: "...the Internet should be better poised to withstand the storm given its ability to combine performance-based advertising along with broad-based branding." The increased adoption of performance pricing models is bound to continue in tough economic times, with marketers looking to stretch every dollar.

At the pinnacle of the ROI hierarchy, brand and direct-response marketers will find two choices available: CPA (cost-per-action) and CPL (cost-per-lead) advertising. Both have several important distinctions that online brand marketers need to know and understand. It's tempting to draw an analogy here to apples and oranges, although the differences are so profound that apples and eggplants might be a better comparison.



An important clarification: when we talk about CPL, we mean marketing leads, which are leads generated for a brand-specific offer. These are very different than sales leads--which are generic, generated on the basis of demographic criteria and resold to multiple advertisers such as mortgage and insurance providers.

Marketing leads are used to build a responsive list of consumers for engagement vehicles such as the community sites, loyalty programs, reward programs and other member acquisition programs.

Let's begin with what CPL and CPA advertising entails, and work toward a discussion of which is more suitable for brand marketers.

An advertiser using CPA or affiliate marketing only pays when a certain action is completed, such as a sale or a registration. This is especially attractive to e-commerce companies, as they can incur marketing expenses only at the moment that sales revenue is realized.

With CPL, advertisers do not pay for sales, but instead pay for customer le ads--customers who have expressed interest in learning more about the advertiser's offer by submitting their contact information. The advertiser then must engage the consumer in the most relevant way.

One key difference is that CPL campaigns are advertiser-driven. The advertiser selects trusted and contextually relevant publishers to run their offers, and remains in control of their brand. With complete control over where campaigns run, advertisers can add or remove publishers from the campaign to ensure that they are getting the correct volume. Advertisers can evaluate the quality of the leads generated by each source and optimize their spending across those sources. And they can see which publisher generated each lead, enabling them to custom-tailor their communications to that source.

On the other hand, CPA and affiliate marketing campaigns are publisher-driven. Publishers browse directories such as Commission Junction, picking advertisements to run on their Web sites. As a result, advertisers cede control over where their brand will appear.

Another key difference between CPA and CPL is the time span: CPA is all about "now." Imagine that every time you saw a product or service advertised, you were expected to buy it at that exact moment. Sounds unreasonable for brand marketers, right?

CPL isn't just about "now"--it's also about "later." It's about starting a conversation and a long-term relationship with a potential customer and helping to build your company's sales pipeline.

So, while CPA campaigns drive some potentially interested visitors to your company's Web site, the vast majority might not be ready just yet to make a purchase. They might navigate away from your Web site, forget about your company and never return. And they leave no way to get in touch--advertisers have no way to remarket to them.

With a CPL campaign, maybe a few consumers buy your product immediately. The vast majority probably are not ready just yet to make a purchase--which is fine! A CPL campaign lets you communicate with those customers who have opted-in to hear from you. You may not have their credit card information, but you have opened the communication pipeline and now have the chance to prove your brand. You can engage these marketing leads with newsletters, community sites and member reward programs--and what better way to boost those branding metrics while moving consumers along the sales pipeline at the same time?

A CPA campaign might deliver a few purchases. But a CPL campaign will deliver you a few purchases and thousands of potential customers who want to learn more about your brand.

Election Day might be over, but online marketers have to make another important choice when it comes to choosing a viable option for performance based advertising. They should vote for CPL. It will be a wise choice.

1 comment about "Apples And Eggplants: The Difference Between CPA And CPL Pricing Models".
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  1. Mason Wiley from Fosina Marketing Group, February 11, 2009 at 11:07 a.m.

    CPA and CPL are not like apples and oranges... they are more like apples and apple sections! Fact is CPA (cost-per-action) includes CPS (cost-per-sale), CPE (cost-per-engagement) and CPL (cost-per-lead). The network i work at - Hydra - is a CPA network. And we run tons of CPL campaigns. So there is no real choice required here... and it is not true to say CPL campaigns are any more advertiser-driven than CPA campaigns!

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