Fixed CPA in Adwords

Posted by Darryl on Mar 23, 2010 in Communication, TFM&A, Tips | 1 comment

CPA is an acronym you may not be familiar with. It stands for Cost Per Acquisition, in effect the amount of money you have paid (or are willing to pay) to acquire a sale, quote or registration via an advertising program.

CPA is primarily used for e-commerce websites, where it is much easier to track your “customers journey” from landing page to checkout confirmation page.

At TFM&A 2010 there was some interesting new ideas surrounding the usage of CPA in AdWords. Traditionally, CPA is used in addition to a normal advertising campaign to help drive potential customers to the site and convert them. Now though, some companies have been looking at using a CPA only approach with managed campaigns.

This is normally handled through an agency who can take the time to apply their knowledge to the situation. This starts with an agreed retainer with the actual costs for the advertisements ultimately coming out of the agencies pocket and an agreed number of acquisitions within a time period. The agency can then take this information and apply it to the campaign, starting off with the AdWords recommended CPA.

This can really go either way, with a set retainer and the agency actually paying for the ads it is then up to them to grow, nurture and evolve the campaign in a specific way to drive up the quality score of the advertisements whilst simultaneously reducing costs to them. This normally results in a loss, at least in the short term, while they build it up.

The ultimate goal is to reach a stage where the costs for each acquisition are below the retainer amount, meaning that a profit is being made and the client is receiving their agreed number of sales.

Over all, this is quite a risky method to use when stacked against normal CPC campaigns and it won’t work for everyone depending on the type of business but can have significant benefits. With more and more people turning to CPC advertising (AdWords specifically) and the newly announced advertising on YouTube pages the face of online advertising is changing rapidly and is set to grow even more over the next few years.

Will you be on board?

Interested in online advertising but don’t know where to start? Contact us at info@rtmedia.com for more information about what we can do for your business