When you start a campaign on Google or Facebook or other media, you would see a lot of acronyms like CPC, CPA, CPM, ROI, ROAS, and so on. These kinds of acronyms are on the daily basis of advertisers and marketers. These are pricing models for investing in advertising and Online Media spaces. Let’s explain each one.
The most important or commons are CPC, CPM, and CPA:
CPC: This stands for Cost Per Click, and is well-known in Google, but also Facebook use it and other platforms. The concept of the CPC is charging you when a prospect clicks your ad. It’s recommended when you have goals such as getting more visitors and traffic to your website or to a landing page.
CPM: Cost Per Mile or Cost Per Thousand. This is one of the most common models on the Internet and consists of charging you per each 1,000 impressions regardless of clicks. This model is great for brand awareness or recognition goals because it can reach a wide number of users that don’t buy your product or service at the moment but the ads keep on the mind of the users.
CPA: or Cost Per Action or cost per acquisition. This model works as CPC but instead of clicks it counts the actions taken by the user that can be filled in a registration or download content. Use this goal for generate leads or get sales.
There are other pricing models like Cost Per Action but are more specific. Let’s crumble them:
CPL: Cost Per Lead. This pricing model is one of the friendliest on the web and is pretty like the Cost Per Action/ acquisition but for getting leads instead of another action. Although you can use the CPA model to get leads but if the platform has a CPL model and you want to get let, this is the type to plan.
CPI: Cost per Install. Again, this is like Cost Per Action but focused on getting app installations and you just pay once for the installations.
CPS: This bidding model is more used in Linkedin and stands for Click per send. This is the principal pricing model when you want to send Sponsored In-Mail to Linkedin. These kinds of ads are great for B2B campaigns.
There are other terms but not are pricing models, rather they are formulas to analyze the performance and the advertising investments.
CR: This stands for Conversion Rates. This is a calculation where you take numbers of conversions and divide them through the total numbers of interactions or click, then multiply by 100 to get a percent. Let’s suppose that you have an ad where people click it 100 times and get 5 conversions, then your Conversion Rate is 5% (5/100=0.05*100=5).
ROI: Stands for Return Of Investment and has converted in the marketing global metrics, because at the end of the day what a business is looking for is more revenue. Thera are some differences formulas to calculate it but let take a look a basic formula represent it this way:
ROAS: Similar to Return of Investment is ROAS, but focused on Advertising Spending. The ROAS stands for Return Of Advertising Spend and measures the efficacy of advertising campaigns. For the formula you have to take the gross revenue of the advertising campaign and divide it by the total of the campaign. Let’s say that you are a fitness instructor and you are selling fitness programs at $20, then you promote the program and invest $100 for that campaign. From that campaign you sold 7 programs that’s equal to $175. You will formulate it this way: (Revenue/Campaign Cost=$). It would seem like this ($175/$100=$1.75). In this example for each dollar the campaign spent it received $1.75. Also, you can convert the result on a percent, in this case would be 175% of ROAS.
All these pricing models shown can vary with your purpose and goal for your campaign. Also, it would depend on the campaign format. Be sure to plan very well and determine which fits better for your advertising campaign.