Direct response marketing is often thought to be synonymous with direct mail. However, it is a tactic that is often used in online advertising as well. Perhaps in contrast with branding campaigns, an integral part of a direct response campaign are the advertising costs and the click and post-click metrics, which then back into two key metrics – CPC and CPA.
Before we get into what CPC and CPA are, I want to briefly discuss CPM. CPM means cost-per-thousand (M is the roman numeral for one thousand) ad impressions. A single impression is an event where one person sees an ad just once. One thousand impressions can mean one person saw the ad one thousand times or one thousand people saw the ad once or anything in between. Many website publishers sell ad inventory on their site on a CPM basis.
Cost-per-click (CPC)
This is a dollar amount that the advertiser is either actually or effectively paying per click on the ad. Actually or effectively? Yes, if an advertiser has negotiated with a publisher to pay $1.50 per click, then that is how much they are actually paying. On the other hand, if a contract is on a CPM basis, and you paid $10 for one thousand impressions and got one click as a result of those thousand impressions, you effectively paid a $10 CPC.
Cost-per-acquisition (CPA) – sometimes called Cost-per-action
This is a dollar amount that the advertiser is either actually or effectively (again) paying for a single action that the it wants the user to perform. The action, which is defined by the advertiser can be a registration for an newsletter, the purchasing of a service or product, or pretty much any other single action the advertiser can think of. As with CPC, the CPA is actual if it is contracted as such with a publisher or vendor. The terms of a particular campaign or media buy can be CPM or CPC, in which case one can back into an effective CPA in a similar way that one can back a CPM into an effective CPC (see above).
Measurement
This is a fairly technically intensive area of direct response campaigns and is about measuring ad clicks and post-click activity. Often the easiest way to do this is by using a third party ad server such as Doubleclick DFA or the Atlas Advertiser Suite, which use javascript tracking pixels (also called spotlight tags). The same task can be accomplished using site-side analytics such as Google Analytics or Omniture. These tracking tools can also be used for auditing CPA vendors, a practice that many advertisers who work with CPA vendors do.
Testing and optimization
These are concepts that are very important to direct response campaigns, yet many advertisers either do not do it or do it incorrectly. The more different types of sites and tactics that can be tested, the more significant the conclusions are. Optimization is then a step-wise process of moving ad dollars away from placements or tactics that are ineffective and moving them to areas that are performing well.
