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The cost per sale transaction model: the Holy Grail?

Geplaatst door Louise Verschuren op Dec 4, 2017 2:53:16 PM

Calculations based on cost per sale (CPS). Only pay for actual sales. Free traffic and 100% performance based. But is this really the Holy Grail? I believe that alternative accounting models, such as cost per lead, often result in much better and longer-term results. And I'm not the only one who thinks this; this year, Rabo Mobiel's online marketing manager, Annette Vendel, halted all CPS campaigns via affiliate networks: "At Rabo Mobiel, we want to be fully aware of what publishers are doing with our displays and brand messaging. With affiliate marketing this is difficult; the risk of reputation damage is higher than any benefits. Sales percentages which also had to be adjusted due to double counts, credit checks etcetera were too high to make this really profitable. "

Qualitative coverage
Another commonly given reason for the disappointing results produced by CPS campaigns is poor qualitative coverage. But what do you expect? After all, the advertiser will only pay for sales. In response to this, there are mail publishers who often send out campaigns at a rate of one every few hours to their ‘legally’ collected email database, hoping for a 0.01% conversion rate. This method is almost impossible to prevent. The fact that 90% of potential consumers never see the message, or even worse mark it as spam, can seriously damage your brand’s reputation.

Increasingly, qualitative publishers who limit their databases to third parties rarely want to settle based on CPS, as the full risk lies with them and because the risk of low conversion rates and consequently missed sales is significant. Rewarding a consumer’s participation with pearls and kudos etcetera is often the only way to expand coverage. There is nothing wrong with this, but there is always the chance that the results will be much different than expected.

Conversion attribution and ‘smart subscribers’
I regularly hear the market report that quantitative targets are not met. And if they have been met, you might have been cheated. Conversion attribution seems to be a tricky subject. Who should be rewarded for sales? Last cookie counts? Double counts when using multiple networks are commonplace. Those unaware of this fact will experience unexpectedly narrow sales margins.

When it comes to a subscription service, you should make sure that you continuously monitor the number of unsubscribers. Typically, sales fees correspond to customer sales over the period of one year. However, if ‘smart subscribers’ have only signed up to collect points, or were led by the possibility of a huge cashback sum and unsubscribed as soon as was possible, the ROI might be very different.

Effective cost per order
The clever ones look past their noses and focus on reducing the effective cost per order, instead of joining the increasingly long queue of candidates tempted by that candy store better known as ‘cost per sale’. What would happen if energy companies, insurers, telecom providers, cable companies and other similar group all did the same? They would simply battle against each other. The winner will be the one who pays the highest and has the best conversion campaign. As publisher, you can choose from a huge range of CPS offers. Just as the consumer likes to shop, the publisher likes to know with which campaign he can achieve the highest profits. Prices are checked and, naturally, so are the conversion rates and whether the offer is sales worthy. The best campaign is the one that gets the highest all-round score and makes sure that the shopping trolley is completely full! And the others... you can already guess that this makes competition a lot harder.

How, then?
Of course, CPS campaigns are not all doom and gloom. There are plenty of benefits. However, I am convinced that alternative checkout models can ultimately lead to much better results. Next time, I would like to tell you how creative branded campaigns based upon cost per lead can effectively help bring down the cost per order in the long-term, and so positively contribute to sales results while at the same time maintaining healthy margins.