Cost per action is about bringing together two specific people. Which people? On the one hand you will have someone who is looking or searching for a specific something and on the other hand you will have someone who has a way to provide it (or who knows how and where to obtain it and who advertises this fact).

With a specific something one could be referring to a desire for something, whether it is an object, a combination of items or a service. Cost per action is about bringing these two people together on the Internet at the smallest possible cost.

We are in fact talking about a specific segment of any sales process that is referred to as prospecting.
Prospecting is also the term used for lead acquisition or client acquisition. Simply put, a company or an individual buys leads or the names and addresses of people they can sell to.

In Africa, one would refer to the commission that any person receives for referring a customer as “baksheesh”, “bakshish” or “matabish” depending on where on the continent you are. It is about receiving a part of the action of a transaction or a reward for having brought a buying customer to a business. It is about rendering any type of service and receiving a stipend or a small compensation or reward in return.

There were times when people would frown upon the practice and consider it a form of corruption when in fact it is a custom and a very intelligent way of promoting one’s business. If you visit Egypt, you will often be advised not to venture out on your own and to use the services of a guide who knows his way around.

I had the privilege of visiting this beautiful country and I experienced the advantages of such a guide. I would let him know about the items we would eventually be interested in and he would know exactly where to take us. I was not surprised to see my guide received his payment every time I had bought an item. It is fair because all parties involved obtain what they want.

A very big advantage I experienced here is that my guide always advised me how far to “haggle” or “negotiate” the price down. Shop owners have the habit of displaying prices that are far above the actual price you can get the item for. In some cases, I would get a discount of up to 80%!!

The customer does not waste his time by having to shop around, nor does the shop owner, who knows he has a good prospect. The “middle man” is served for having put his knowledge about the city to good use. In Internet parlance, the customer is taken to the right landing page, finding the item he wants to find at the best possible conditions, the shop owner makes a sale and the middle man has “monetized” his know-how.

In CPA, the process is pretty much the same, except for the fact that everything happens on the Internet by way of interposed computer screens.

Advantages of CPA

1) No cure-no pay:

The agreement you make with a cost per action service provider will give you the security you need to ensure that the results correspond to what you expect to receive in return. There is no way of avoiding a small percentage of false positives, but the vast majority of results will fall within expected parameters.

In many cases, false positives beyond a certain percentage are discounted from invoicing by contractual clauses negotiated beforehand.

2) More economic security:

When you buy a CPA campaign, you are certain that you are not going to waste your advertising budget. By choosing the correct vertical market segment it becomes a numbers game. You can determine beforehand whether it is worth spending your money.

3) Precise cost forecasting:

If you know how much prospect acquisition is going to cost you, it becomes easy to determine which amount of spending allows you to stay in profit. By pursuing your leads, you will be able to know how many leads are converted into paying customers. In many cases, these customers lock themselves into a long term relationship with the service provider and become a source of repeat business.

Disadvantages of CPA:

1) No Pay – No cure:

You will need to budget a certain amount of money to buy CPA campaigns. A well known part of business success is linked to correct advertising. If you don’t invest in advertising, the road to commercial success and profits will be longer, the exception confirms the rule.

2) Immediate qualitative follow up is required:

Before engaging or “firing up” a CPA campaign, the back end needs to be ready to act upon results. Leads do not stay warm very long, so when you get them, the structure needs to be perfectly tuned to process requests quickly, smoothly and efficiently. Failing to take good prospects in charge will end up in poor results and low sales, thereby wasting the investment resources.

3) One needs to be proactive at all times:

One of the disadvantages of CPA is that it requires one to keep a keen an eye on the numbers 100% of the time. Markets are notoriously volatile and a warm lead today can suddenly cool beyond recuperation by the same time tomorrow. A large number of external factors can come into play, for example, a competitor might hit the market with what appears to be a better product or deal.

Tagged as: Advantages And Disadvantages, advantages and disadvantages of CPA, Africa, Baksheesh, Bakshish, Beautiful Country, Client Acquisition, Continent, Corruption, cost per action, CPA, Desire, Egypt, Lead, Leads, Names Addresses, Names And Addresses, People, Privilege, Segment, Stipend