Sep 02 2010
Emory Rowland has helped optimize cost per action (CPA) campaigns for national brands like Terminix, Liberty Medical and TruGreen, earning a flat rate to generate qualified leads that turn into new customers.
Are there some great opportunities using the CPA model? And if so, how do you qualify them?
Yes, and you can create opportunities with your existing clients if the potential for mutual profitability is there. Here are some questions that come to mind when I see a potential CPA opportunity with a client:
The first thing I try to get at is to determine the lifetime value of a customer. Most companies know this or can make a good guess. However, you and the client will want to agree with certainty on a figure that is supported by data. If you don’t get this right from the beginning, the campaign is in jeopardy.
Once you know the lifetime value of a new customer, you can begin playing around with a cost per lead or cost per acquisition figure. Does it make sense to do a lead based campaign or a sale based campaign? What is the conversion rate of the leads that are coming in?
Consider other factors.
Can the client handle a large number of leads–they’d have to be followed up on while they are hot, of course. Is there a sense of what number of leads they are looking for and might cap out at?
Does the company have a call center and can they provide phone numbers that can track our conversions?
What constitutes a qualified lead? What criteria does the client want to use to scrub and choose which leads to pay for and which leads to toss out?
Is the brand nationally recognized?
Is the company doing business just locally or in a group of states or nationwide?
Is the client currently doing/planning TV or radio ads?
What does the client spend on PPC? What do their PPC campaigns look like? Will you be competing with them?
Are they doing any CPA deals with other companies? Would they consider signing an exclusive CPA deal?
Can you give an example of a deal breaker and an example of a deal that worked out profitably for both you and the client?
Most of my experience comes in at the implementation stage after the deals have been closed, so I am not sure if I could give a specific deal breaker example. In fact, many of the qualifying questions come from issues that had to be overcome after the agreement was signed. The worst problems often result from the payout being too low or too high because of an incorrect estimation of the lifetime value of a new customer. If too low, then you are struggling to make a profit and feeling like you are working for nothing. In a case like this, you may find yourself going back to the client to renegotiate. If the payout is too high, then the client will eventually realize it and come to you.
What else can go wrong with a CPA campaign?
- Conversion – consumers don’t like the product or maybe the brand is not what you thought it was.
- Demand – there may not be enough search volume.
- Competition – too much can mean high CPC’s and long waits on organic search.
- Call center failures – calls cannot be dropped and have to be qualified and handled correctly, always with the ultimate goal of conversion.
- Leads not being worked when they are hot.
The CPA site or landing page driving leads to the client is normally the property of the CPA company, not the client. In order to protect the brand, the client may insert himself into the process by trying to dictate such things as landing page copy, design and functionality. There should be clear lines drawn in the contract to demarcate the extent of authority the client has over site content and presentation. The client will always be expected to approve/disapprove brand messaging. When the client’s presentation preferences start interfering with conversion, then it’s time to speak up.
On the other hand, I’ve seen ideal CPA campaigns that were profitable from both my view and from the client’s perspective. The best scenario occurs when both sides are fulfilling their responsibilities resulting in a profitable campaign for both parties.
It seems like a profitable CPA campaign for both parties is really a business venture between the service provider and client. Do CPA opportunities emerge like this after a business relationship has been established, or are CPA’s introduced right at the beginning?
Well put. I agree. It feels more like a partnership than a client/provider relationship. In my experience, opportunities tend to come more at the beginning stages of the business relationship. If what the client really wants is customer acquisition, you will probably find yourself performing a CPA test early on.
Emory Rowland has been engaged in and writing about SEO since the late 1990’s. He is founder of Clickfire, a review and opinion site for site builders, bloggers and social media enthusiasts. He is also President of Leverable, advanced SEO strategies.