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Types of pricing for a display ad campaign

By Sandrine Tessier,
Content Strategist
June 1st 2017

Determining your marketing budget is one thing, now let’s see how that translates when you want to get into a display ad campaign and get maximum results from it. Depending on your goals, different types of pricing are to be considered if you want to get the best ROI possible, because all cost structures may not be relevant to your overall objectives.

To help you figure it out, here’s an overview of the various pricing models for a display ad campaign and what are their benefits.

Cost-per-Click (CPC)

As the name indicates, this option allows you to pay per time your ad is clicked on. For advertisers, it allows you to have a clearer budget: when using CPC, you set a price you’re willing to pay for a click, and your ad will only be targeted to web pages / ad spaces that sell for this price. If you’re goal is awareness, this might not be the best solution – to get prime spaces and well-targeted websites, you will have to spend more money to have your ad shown – so if you are going for volume, you might want to consider CPM as a better solution.

Cost-per-Mille (CPM)

This option is trickier for advertisers because you pay per 1000 time your ad is shown, no matter whether you get clicks or not. Now, if your ad is very well targeted and is in a high viewability format / location, this option may be very effective. However, if your ad is shown at the bottom of the page, you will be charged whether the users actually view it or not – that’s why it’s even more important to choose high-impact formats and target your audience precisely.

However, this can be a great option for awareness campaign, as your goal is to make your brand or a new product known; clicks or acquisition are not necessarily your primary focus at this point of the campaign.

Cost-per-Acquisition (CPA)

CPA is definitely the most expensive type of pricing, but can also be the most rewarding, as advertisers are only charged if the user makes a purchase. So, for example, a user was looking at a watch on your website, then, two days later was retargeted with an ad through social media and finally purchased the product – that’s when you get billed. So, this solution has great potential for high ROI.

This process gets tricky though because it’s hard to see if the purchase can actually be attributed to the retargeting ad or if the user was converted through a different incentive. A way to help the attribution model is, for example, using a promo code that will only be found on your retargeted ads. That way, when the purchase is made, you can track through which channel the user was reached.

Here is a simple way to calculate your effective CPA, or eCPA: if you spend 200$ on a retargeting campaign for a production, and the number of clicks converted to 40 purchases on your website, your CPA was 5$. If the profit you make on said-product is higher than 5$, than CPA is a good option. Plus, this option does not take into consideration returning customers from this point on, meaning you may have acquired more than just one sale, but a recurrent customer that will purchase x amount from you monthly for the next year.

Conclusion

The type of pricing you will choose will depends on your overall objective – Here’s a simple way to look at it:

Budget control = CPC Reach and awareness = CPM Sales ROI = CPA

You have more questions about CPC, CPM and CPA? Reach out to one of our experts and let them advise you on what’s your best option!

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