How to Track Online Marketing ROI Using Cost-per-ActionForget clicks, page views, and impressions;
only way to effectively track your online marketing ROI is through Cost-per-Action (CPA) analysis.
By Rick Crosby *
As online advertising market is poised to grow nearly $10 billion over next six years, it’s essential that we remember importance of measuring effectiveness of that spending. There’s no point undertaking any marketing or advertising campaign unless you can measure its results. And results are best measured in terms of return on investment (ROI).
Unfortunately, in world of marketing and advertising, many businesses seem to be losing touch with their general objectives. The tools may have changed, but principles remain same – Your advertising campaigns are only successful if they meet objectives you set out to achieve. So if you’re after increased sales, you need to measure cost of each sale generated to determine your return on investment.
Fortunately for advertisers, tracking ROI for online advertising is much easier than it is for traditional forms of advertising, such as TV, Radio, Newspaper, Magazine, and Billboard. When you market online, every advertising campaign can be tracked and measured all way down to penny. This is why more and more advertising dollars are being spent online every day.
Why Not Cost-Per-Click or Cost-Per-Impression?
When it comes to tracking campaign effectiveness, many businesses rely on Cost-per-Click (CPC) and Cost-per-Impression (CPM) statistics. But what many people forget is that for most businesses, clicks and impressions don’t earn you money. So by tracking clicks and impressions, you’re not really tracking return on investment. The same is true of page stats.
If you’re like most businesses, impressions, clicks, and page views are simply a means to an end. (In fact, without corresponding sales conversions, they’re nothing more than unjustifiable expenses.) If you only earn revenue from sales, you need statistics linking costs and sales. In other words, you need to measure cost-per-action (CPA).
Cost-Per-Action (CPA)
In a CPA campaign, you run an online ad on third party sites and they charge a commission when a lead is generated or converted. It’s performance-based pricing. This means publisher wears most of advertising risk, as their commissions are dependent on good conversion rates.
Perhaps most widespread use of CPA is affiliate marketing. With affiliate marketing, you determine what actions you will reward and how much you’re willing to pay per action. For example, you might engage an affiliate site to promote your business. If they generate sales for your business, you can pay them a commission. Your cost-per-action would then be cost per sale or lead generated.
Tips on Conversion
The following conversion tips will help you plan your CPA campaign and avoid some common pitfalls.
1) How are sales and leads recorded?
For many businesses, obvious result which constitutes a conversion is a sale. If your sale is recorded or registered online (e.g. e-commerce), it can be considered a measurable action. This means you can choose a sale as desired action in your CPA campaign.
Depending on aim of your campaign, you may want to measure other outcomes in addition to, or instead of, sales. For instance, you might measure leads in form of membership registrations, newsletter subscriptions, software downloads, or just about any other activity beyond simple page browsing. So when your customer clicks register, or subscribe, or download, etc., conversion is automatically registered and details are fed back you’re your CPA campaign.
