Affiliate Marketing Payment Models Explained
There are a lot of different payment models in affiliate marketing, and they will ultimately affect how you run your campaigns. However, theory and practice remains pretty much the same across all models.
Each payment model essentially describes what your conversion goal is and what action visitors have to take for you to get paid. It’s crucial at the beginning of running any offer that you work out what the cost per action is, as without it, you can’t work out whether or not you are profitable. Luckily this is quite easy. Your CPA is essentially how much it costs you to achieve the required outcome. Here’s a quick example:
If you are advertising watches, and you get $10 every time someone buys a watch, then you have to make sure that it costs you less than $10 to get someone to buy it. If your commission is $10, but the best CPA you can conceivably achieve is $12, then you’ll know that you need to find a different offer with a higher pay out if you want to stand a chance at being profitable.
Here is a list of the most common payment models in affiliate marketing:
CPA - Cost Per Action
Cost Per Action can be used as a catch-all term for pretty much any of the payment models. All it means is that you get paid when a visitor commits a prescribed action. The action they take could be any of the actions from the other methods, however, it’s most often used to mean sale. CPA is sometimes referred to as Cost Per Acquisition.
CPL - Cost Per Lead
Cost Per Lead refers to lead generation. Affiliates running CPL campaigns get paid every time they get someone to give their contact details. These details can then be used by advertisers to sell their products or services to an already interested audience.
Payouts for CPL campaigns will often be lower than CPA campaigns as they don’t require visitors to spend any money before the conversion occurs.
CPS - Cost Per Sale
Cost Per Sale means that affiliates get paid for every visitor who makes a purchase after clicking through their campaign.
SOI - Single Opt In
Single Opt In is a form of lead generation. It requires visitors to enter their details into a form, usually name, email address and home address.
DOI - Double Opt In
Double Opt In is similar to single opt in, the only difference being that additional verification is required, usually done via a verification email.
CC Submit - Credit Card Submission
Credit Card Submission requires a visitor to enter their credit card details and pay a small transaction fee in order to complete the conversion.
CPO - Cost Per Order
Cost Per Order requires visitors to make a valid order before the conversion goal is met.
CPI - Cost Per Install
Cost Per Install most commonly applies to mobile applications. When visitors download and install the app on their phone or pc, then the conversion goal will be met.
CPC - Cost Per Click
Cost Per Click can help affiliates see how well campaigns are performing. As a general rule, you want your CPC to be as low as possible as this can be a key indicator of how good your ad is.
CPV - Cost Per View
Cost Per View refers to how much it costs to get a visitor to view a video or banner.
CPM - Cost Per Mille
Cost Per Mille is another important figure in affiliate marketing. CPM refers to how much an ad costs per 1000 impressions. In other words, how much does it cost to put your ad in front of 1000 people. Once again, the lower the number, the more likely it is that your ad is good quality.