CPM vs. CPA! The Debate Will Never Die

Digital media planners and online marketers face a tough decision and this debate of buying on CPM and CPA models is not new. Do you buy online media for branding power or purely for cost efficiency? Beyond the media buy, whether you use CPA (define) or CPM (define) has strategic implications.

Given online advertising’s measurability, both brand and response-centric marketers look at online spend in a strictly action-driven, promotional context. From this tactical perspective, they use online promotional budgets to generate leads or other actions that, like their offline equivalents, yield some branding. Yet the potential synergistic effect of smart spending can be overlooked.
I have seen some small time agencies setting up “digital media shops” selling media only on CPA basis and later on realising that there is more to this entire process, and later on finding it difficult to survive as they lacked knowledge about other factors which have huge impact on brand equity.

I personally feel that a hybrid media model delivers the best results by building brand and purchase intent while selling.
CPM and CPA are complementary advertising buys that fill different needs. CPM brands, while CPA primarily drives response. CPM can also be used for direct marketing. (Remember, direct response doesn’t work for every product.)

Strategic Perspective

Consider your marketing strategy’s media aspect. How do the following apply to your offering?
– How do target customers use the Web? How does this relate to your offering? How does it fit into your overall strategy?
– What are your marketing and advertising goals? Do you need to improve branding to build purchase intent, drive immediate response, or both? How will the Internet get you where you need to be?
– How does your ad’s viewing environment reflect on and influence branding and purchase intent? Can your media buy scale? Broadly assess editorial direction, content, target audience, and other advertisers (in terms of product and quality).
– How does creative, including copy, design, format, and landing pages, relate to the target customer and your marketing strategy?

Tactical Considerations

Publishers price ad impressions based on reader quality and demographics. Marketers usually advertise online to acquire customers and immediate sales, as measured by return on investment (ROI). For advertising to be effective, it must usually drive potential customers from ad to Web site to a required action’s completion.

The difference between CPM and CPA buys depends on who bears the risk for converting an impression into an acquisition. This is basically your yield (the product of CTR and conversion rate (CR)).

When publishers sell media on a CPM basis, they know how many page views are required to fulfil their obligation. When they sell media on a CPA basis, they don’t know in advance how many page views are needed. Many factors affecting yield (e.g., landing pages and conversion processes) are beyond their control. CPA-placement sellers generally charge a premium to accept the risk of your ad yield.
CPA only deals decrease the value addition by a media agency as the game is between brand and the media owner. Agency, who understands brand more than any other third party in the entire ecosystem, is not able to play huge role because of CPA model because the role gets limited to choosing which channel is delivering lowest cost per action.

Using CPA-only deals can limit your options and potential universe, as not all publishers accept them. Choices are very limited, primarily to sites with lots of unsold inventory and low demand. Using this model alone can result in brand placements in totally irrelevant environments on web which may not be good for brand positioning and overall health of the brand.

Consider the following:

– Which sites efficiently contribute to your reach goals? Do they deliver quality customers? (If you don’t know the quality of customer derived from each combination of media placement and promotional campaign, you need a better marketing tracking system.)
– How does media context interact with your ads? Is advertising integrated with content? Does this environment help increase purchase intent? Does the content complement your product (e.g., health for health products)? Should you develop and/or test new creative approaches?
– Are the media cost effective in light of your strategic goals and key indicators? What’s your projected customer lifetime value?
– Can the campaign’s effectiveness be improved by optimising various factors, such as format, content, landing pages, and media placement, to get higher conversion rates and lower acquisition costs? Run different tests to determine which work best for your offering.

Both models have their own merits provided a media planner knows when to use what, given the context of brand, and implications of such media buys on the overall brand equity.

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