Estimated 6 minute read
The CPC or CPA Question
Three opportunities for greater retail campaign performance with cost-per-click budgets
For nearly 20 years Connexity has been managing ad campaigns and delivering ecommerce growth for hundreds of top brands in dozens of product categories. While the size of budgets, strategic campaign goals and target performance metrics vary dramatically from brand to brand, one common decision that all marketers must make when launching a product advertising campaign is which cost model to use.
The Cost Models
The two most common advertising cost models for ecommerce campaigns are CPC (Cost-Per-Click, similar to Pay-Per-Click or PPC) and CPA (Cost-Per-Acquisition or Cost-Per-Action). The most obvious difference between the two options is in what the names suggest.
CPC – In a CPC model the retailer is charged for every click a consumer makes to the product link from a placed advertisement. CPC is commonly associated with performance marketing networks, such as Connexity. Here, retailers prioritize competitive sales and customer growth with greater exposure to differentiated traffic sources and with full campaign management that includes expert budget optimization.
CPA – With CPA, retailers are charged when a purchase is made after clicking through on the promoted product link or placed advertisement. CPA is commonly associated with affiliate marketing relationships. The traffic source, usually a content publisher, is paid via a revenue share with the marketer on every conversion. This type of ad model enables the retailer to focus on reducing budget risk.
The Opportunities
Many marketers will stop their consideration of different ecommerce advertising solutions with an understanding of the basic cost model information outlined above. But beyond how costs are assessed, there are significant differences in the opportunities presented with CPC that are not as readily available in CPA spending. Retailers should understand and consider these opportunities when making an informed budget decision.
1. Accessing Buyers
Finding active shoppers and reaching new customers requires a diverse set of advertising channels that deliver high-intent, retail-focused consumer traffic. With broad CPA affiliate relationships, you are relying on a larger portion of traffic that is not necessarily shopping focused. This is often editorial content about a particular topic intended to attract readers interested in that topic. While one or more products may be referenced and linked, the traffic isn’t necessarily motivated by a shopping or purchase intent. They’re motivated by an article about the topic.
Traffic accessed in performance-focused CPC budgets is fundamentally different with unique opportunities for growth and competitive value. For example, the Connexity Performance Marketing Network operates on a CPC cost model, generating over 1.5B clicks annually across thousands of diverse shopper traffic sources reaching consumers:
– Discovering Products in premier entertainment, news, and content sites where they already spend time
– Following Inspiration in social media feeds from 5,000+ sophisticated influencers promoting supported products
– Comparing Prices or Payment Options in mobile-first buy now pay later apps or in comparison-shopping portals
– Searching for Product Options in popular search portals where in-demand exposure requires active CPC bidding
The additional scale from CPC channel sources enables greater opportunity to reach different consumers. The diversity of traffic sources also drives more competition for that traffic and enables flexibility in optimizing to a variety of goals. This means more opportunity to make your budget perform in different market conditions.
2. Remaining Competitive
Accessing the most differentiated online channels that deliver the highest quality consumer traffic requires retailers to remain competitive. Frequent bidding by competing brands with CPC budgets drives up the cost of placements on these sources. To stay competitive in your space and to protect against runaway costs, your campaign needs to be bidding for these coveted CPC placements.
While an affiliate CPA relationship can be a valuable component in a campaign, the affiliate engagement model is generally too passive to capture the most in-demand traffic opportunities. Accessing these placements requires the type of active bidding and granular optimization only offered by a performance marketing network with the technology and resources to engage in competitive bidding activity.
The Connexity performance marketing network employs trusted marketing technology and expert analytic teams to optimize CPC budgets at a granular level. Systems like our Smart Pricing technology drive active bidding and ensure a marketer’s CPC ad spend is aligned to their overall campaign goals.
“Connexity has delivered incremental sales revenue and new customers outside of traditional paid search. Their access to premium supply channels and proprietary Smart Pricing technology has ensured our ad spend is consistently aligned with our profitability goals”
– Madeleine Backfield
Media Activation Manager, Lenovo US
3. Prioritizing Growth
While a CPA budget may feel like a safe investment, focusing on CPA engagements alone may ultimately cost you more in lost growth opportunity. The high-quality, incremental consumer traffic that drives significant growth is only available by bidding with a CPC budget. Refocusing your budget with an allocation to CPC can enable you to prioritize growth.
Performance Marketing Networks, like Connexity, run on CPC budgets to keep retailers actively bidding on more competitive traffic. This strategy prioritizes growth by accessing high-intent new shoppers on a diverse set of retail-oriented traffic sources. Expert budget management and traffic optimization can ensure your spending follows a strict ROI performance metric.
“Until we began working with Connexity, our business was truly seasonal. With the additional reach of Connexity paid listing ads, we grew sales 5X in our second year – all while maintaining target cost-of-sale ranges”
– Marc Smith
President, Prime Pool Market
The Bottom Line
A CPA affiliate partnership is a valid option for establishing a foundation of activity. Being linked in topical articles that generate consistent traffic over a long period of time is particularly helpful in higher-funnel discovery or awareness stages of shopping. Conversions will occur, but in many CPA affiliate cases you are relying on traffic with an interest in the content topic to click through on a product link. So, the average conversion rate may not be high enough to drive significant growth – that will be a longer waiting game.
On the other hand, if you want to be more competitive in your space and are aiming for faster growth, you need greater exposure to more channels of traffic with a higher purchase intent. This means actively bidding with a CPC budget on desirable traffic. With this strategy, you are putting energy into the lower funnel evaluation and intent stages of shopping, where higher conversion rates occur. A CPC budget relationship is also where a managed service can more nimbly scale exposure on-demand and in reaction to shifts in the market to gain incremental sales and capture incremental customer growth.
Learn more about how Connexity can help you establish a CPC budget strategy and optimization plan.
