How to Track Online Marketing ROI Using Cost-per-Action

How to Track Online Marketing ROI Using Cost-per-Action
By
Rick Crosby

Forget clicks, page views, and impressions; the only way to
effectively track your online marketing ROI is through Cost-
per-Action (CPA) analysis.

As the online advertising market is poised to grow nearly $10
billion over the next six years, it’s essential that we
remember the importance of measuring the 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 the world of marketing and advertising, many
businesses seem to be losing touch with their general
objectives. The tools may have changed, but the principles
remain the same – Your advertising campaigns are only
successful if they meet the objectives you set out to achieve.
So if you’re after increased sales, you need to measure the
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 the way down to the 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 the
publisher wears most of the advertising risk, as their
commissions are dependent on good conversion rates.

Perhaps the 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 the
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, the 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 the desired action
in your CPA campaign.

Depending on the 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 the 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., the conversion is automatically registered and
the details are fed back you’re your CPA campaign.

In either case, at any time, you can log in and view your
campaign results in real time.

2) Set up a landing page to capture lead contact details

If you’re paying for leads, you obviously need to know when a
lead is actually generated. Generally a lead becomes a lead
only when the customer supplies you with their details (name,
contact numbers, email, etc.). This means you need to set up a
landing page on your site capture these details. Your capture
page can be collect contact information or it can be as simple
as a signup for a monthly newsletter.

3) Get your CPA provider to set up your landing page

If you don’t have the time, inclination, or resources to set up
the necessary forms and database on your own site, the CPA
provider can do it on their hosted server. They collect the
leads and calculate the statistics. For many businesses, this
is the ideal option because it saves them time and money, and
there are no tracking discrepancies.

4) Find a CPA provider you can trust

If your CPA provider will be collecting leads and calculating
statistics, you need to know you can trust them. There are
plenty of trustworthy providers out there; you just need to
find them. A trustworthy provider will find out what your
exact needs are and spend time researching your niche market
online. By performing this marketing analysis, your provider
will be able to tell you exactly how much business they can
bring you on a daily, weekly, or monthly basis. If they can’t
provide you with this important information, then this is a
good indication that you are not speaking with a professional
internet marketer.

Just as importantly, with a trustworthy provider you’ll be able
to personally speak with the internet marketer who will be
working on your project. This person will be an expert in the
field of internet marketing, not just a sales rep.

5) Avoiding excess fees

WARNING: Some CPA providers charge a setup fee ($2,500 to
$10,000) and/or a network fee (20% to 30%) for each sale or
lead that is generated. Before committing to a provider
demanding high fees, make sure you are getting more for your
money. Most of the time high fees simply mean the sales rep is
getting a higher commission!

6) Measuring your conversion rate

The Formula for measuring CPA is by dividing the total cost per
advertising campaign by the total number of actions
(conversions) that were received from each ad campaign. For
example, if your online ad campaign costs $1,000 and generates
50 sales or leads, your cost per action (CPA) is $20.00 each.

7) Improving your conversion rate

A high conversion rate depends on several factors: Visitor
Interest Level – The interest level of the visitor is
maximized by matching the right visitor, the right place, and
the right time. Offer Attractiveness – The attractiveness of
the offer includes the value proposition and how well it is
presented. TIP: Small, impulse items typically have a higher
conversion rate than large shopping items. Ease of Process –
The ease with which the visitor can complete the desired
action is dependent on site usability. Important
considerations here include intuitive navigation, contact info
capture page, “Buy Now” or “Apply Now” buttons and fast
loading pages.

In summary…

Because CPA allows you to identify exactly how much it will
cost to acquire a customer, there’s no guesswork involved. You
have the ability to precisely calculate your ROI. And because
online tools and ad serving technologies allow you to monitor
effectiveness in real time, you can even tweak campaigns while
they’re still running. If you can master effective online
advertising, you’ll not only save thousands in implementation
costs, you’ll also reap the rewards of a far higher return on
investment.

Paul White is a 42 year old former teacher. He now helps people
all around the world to become wealthy online. Whatever you
are selling, visit the popular site: http://www.profitmountain.
com (http://www.profitmountain.com) and if you subscribe to
Profit Mountain`s FREE wealth building newsletter, you will
also receive FREE advertising for the next 12 months! (Worth
$200!) as well as loads of other things!