Everyone loves a deal. In fact, there are few things more rewarding than getting a business purchase just right –– and knowing you’ve managed to save money in the process. However, since most business transactions are more nuanced than the average consumer purchase, figuring out which payment plan is best for your company is often more complex than simply comparing and contrasting prices. This is definitely the case with paid digital advertising. Indeed, CPC, CPA, CPM, and all “cost-per” payment plans offer business owners different options –– though no one method is objectively superior to the others. The truth is, business owners need to take many factors into account to determine the ideal advertising strategy for their company. And to explain it all a bit further and help you decide which type of advertising you should pursue, here’s a quick look at CPC, CPA, and CPM advertising, with some pros and cons associated with each.
CPM Pros and Cons
In paid advertising, CPM stands for Cost Per Mille but may be more practically translated as Cost Per Thousand Impressions. (Mille is Latin for thousand.) To put it simply, when a business decides to pursue a CPM advertising strategy, they pay the advertiser a fee based on every thousand impressions generated. An impression in the business sense refers to the number of people exposed to an ad. So if your ads have a click-through rate of around 10%, you would be paying for 1,000 impressions and would receive 100 clicks for that price. CPM advertising can be a fantastic way for a company to dramatically increase their online profile. However, many small businesses don’t have the budget to cover the costs associated with this form of advertising. Furthermore, since CPM ad campaigns are by their nature aimed at increasing exposure, they can have low click-through rates and fail to contribute to many sales directly. (This is especially true if the content of a web page doesn’t sync up with the content of an ad on it.)
CPC Pros and Cons
CPC or “Cost-Per-Click” is also associated with PPC (Pay-per-click) advertising. (Yes, it is easy to confuse the two.) PPC advertising has gained notoriety thanks to programs like Google AdWords. PPC advertising is fairly straightforward. If no one clicks on your ad, you don’t pay a thing. This is advantageous for businesses, but it also forces them to manage their PPC accounts closely. That’s because a PPC ad that gets clicked on often –– but doesn’t lead to any sales –– is a losing proposition. Furthermore, the cost-per-click of PPC ads depends on a number of factors, including the keywords used in the ads, the competition, and the quality score of the ads.
CPA Pros and Cons
CPA can stand for either “cost-per-acquisition” or “cost-per-action” depending on who you ask. Either way, the principle remains the same. With CPA advertising, a business will only pay once a consumer clicks on an ad and then takes a pre-specified further action, like downloading a content offer, for instance. It’s natural to assume then, that CPA advertising will produce the highest conversion rates since it requires more activity from consumers to trigger. But it comes at a price. Advertisers will usually charge a premium for CPA ads since they are perceived as a low-risk play for businesses. So companies that decide to implement a CPA advertising strategy need to crunch the numbers ahead of time to determine if they can generate a positive return on investment.
(Note: the term “CPA” may also refer to when a business calculates its PPC metrics. You can determine how much an acquisition cost your business by taking your ad spend and dividing it by the number of conversions you got.)
If you’re still not sure which form of digital advertising payment and structure will work best for your company –– don’t worry. Instead, contact the Agile & Co. team today for professional assistance. We know how to manage paid advertising accounts to ensure maximum ROI, so you don’t have to stress about it. Plus, for more information about how PPC advertising fits within an inbound marketing strategy, check out our free eBook here