Historically when thinking of performance marketing distribution, loyalty and deal sites are the first channels that come to mind. However, performance marketing can expand into so much more than traditional channels. With Google being responsible for 96% of mobile search traffic and 94% of total organic search traffic, non-traditional methods are more influential than ever before. Distribution methods such as cart abandonment, retargeting, and search are just a few of the non-traditional areas that allow advertisers to pay for traffic on a Cost per Sale (CPS) basis.
At times it can be more cost-effective and less risky to run on a CPS. In other situations, a team running an offer on a CPM can also be cost-effective with reasonable risk involved. Evaluating the amount of time spent managing the program internally helps to identify whether it makes sense to outsource to a publisher on a performance basis. If the cost is equivalent or extra to outsource these efforts, it’s likely not worthwhile in terms of a return.
In order to calculate if it’s cost-effective to run on a performance model, a brand must divide total costs from the CPM rate and divide that by the number of sales driven. This calculation provides the CPA rate, even though it’s being derived from a CPM. Factors that affect the ultimate CPA rate are click-thru rate, landing page effectiveness, and final conversion journey.
When paying for these non-traditional distribution methods in affiliate, conversion factors don’t directly impact the final CPA cost because again, the publisher only gets paid after the conversion. Additionally, this ends up lowering the advertiser’s risk by only paying on the final conversion. It is common for cart abandonment, retargeting, and search to be more cost-effective on a CPS basis. This is because advertisers are limiting the number of influencing factors. According to a 2018 study, the average click-thru rate for retargeted ads is 10 times that of display ads. Each situation is different, but Ignite encourages its clients to do an analysis to ensure channel efficiencies.
Once advertisers have baselines for traditional pricing such as CPM or CPC, small tests can be run on a CPS. These tests can determine which is more effective. If the CPS is lower while maintaining volume, then it makes the most sense for advertisers to move to an affiliate model. Ignite finds advertisers are increasingly harnessing the power of non-traditional performance distribution methods to scale their user acquisition and sales.