In the world of online marketing, there’s a bunch of acronyms thrown around that are often confusing to new marketers. It’s important to know what these acronyms stand for and what they mean for your business.
What is CPL?
CPL stands for Cost-Per-Lead. When you are determining your marketing budget, you may consider doing CPL advertising. This means that you are paying per lead generated.
CPL advertising is typically less targeted but is still a really great way to go. Typically, CPL advertising can run anywhere from $1.00 per lead for loosely targeted leads to upwards of $100.00 per lead for highly targeted, “buyer” leads.
A “buyer” lead is a lead that has already purchased a product in the same or a similar niche as the product or offer you are selling. While $100 may seem like a hefty price tag, it may actually be a great deal depending on your CLV (oh no…another acronym!).
What is CLV?
CLV stands for customer lifetime value and is actually the most important number you need to know in your business. the CLV will drive all of your other business decisions and will help you understand what is a reasonable marketing budget for your business.
To calculate the LV of your customer base, take the total revenue you’ve generated from your sales and divide it by the number of customers you’ve acquired. For example, if you have generated $58,000 from 40 customers, then the LV per customer would be: $1450.00.
Understanding your CLV will help you to know exactly what it will take to reach your goals. If your business goal is to achieve $1,000,000 in sales and your CLV is around $1,000 then you’d know you would need a minimum of 1,000 customers to achieve that goal.
Then you can set about planning and strategizing how to get there.
How can you tell if the CPL is good for your offer?
It just takes a little math. Let’s say you get a CPL of $10.00. If the Lifetime Value (LV) of your customer is $100.00, then spending $10.00 to get that lead would be great because you are 10X your investment.
What is CPA?
CPA is cost-per-acquisition. This is different from CPL because with CPA you are actually paying for a closed sale or a specific action. This is a great way to advertise a product because you are paying for the action you have determined. It may be a sale, a lead or click. (In those cases you would also apply CPL and/or CPC).
CPA is often disclosed by affiliate offers so that the affiliate marketer will know the average cost-per-acquisition when they are marketing a product. This helps the marketer to adjust their marketing/campaign budget so that it is profitable.
For example, if an affiliate knows that the CPA of an offer is around $45.00 and the commission on each product is $100.00, they know that their profit will be around $55.00 after marketing costs.
What is a CPA Network?
A CPA network is a network of advertisers that will pay affiliates for a specific action. For example, Clickbank is a CPA network. Companies and advertisers will load their products into Clickbank and the affiliate marketer will then drive traffic to the various offers.
When a specific action is achieved, such as a sale, the affiliate marketer is then paid for that action.
Another example of a CPA network is Commission Junction. Commission Junction has thousands of advertisers, including some well known names like GoDaddy, Constant Contact, Discover Card, and more. The advertisers are broken up into categories.
As a website owner and/or affiliate marketer, you can choose to advertise any of these companies and/or their products. Some companies will you per click delivered, some for leads delivered and some for sales. They have decided on their CPA and you are paid for delivering the specific action.
As a business owner, you can choose to advertise on CPA networks. You then pay only for the specific action delivered.
As an affiliate, you can choose from thousands of offers that match your marketing niche, the niche of your list, and the niche of your website.
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