Why brands are leaning towards CPA model for influencer marketing

April 5, 2020 12:55 PM

Through CPA pricing, the brand compensates a content creator for the number of actions they deliver

The brand rewards the blogger, instagrammer or agency only if users engage in an actionThe brand rewards the blogger, instagrammer or agency only if users engage in an action

By Ankit Agarwal 

You can doubt the degree of influence online creators have, but you can’t doubt their popularity. They are the cool kids on the block and everyone wants to hang out with them. Hence, the stratospheric rise of influencer marketing and the inherent problems. After all, anything that rises precipitously lacks time to sort out growing pains.

One issue with influencer marketing is estimating the return on investment. Counting likes is a vanity metric; not a commendable way to judge if the millions of $ brands shell out are worth it or not. It is why brands are now moving towards a cost per action revenue model as opposed to paying a lump sum amount for influencer collaborations.

The Present, slightly problematic scenario

When brands run an influencer marketing campaign, they compensate the influencer with a free product, flat fee or both. The payment is given upfront, i.e., before the brand sees any results. It makes determining the ROI on the digital ad spend near impossible for the brand.

Add to it the fact that the partnership structure is challenging to scale brands prefer to work with bigger influencers. This is an issue in itself because the authority nano and micro-influencers (those with modest online followings) hold presently is far higher than those with a massive following.

Put all of it together and stepping into influencer marketing is akin to living in the Wild West.

The shift to more transparent CPA model

Ignoring influencers is out of the question for brands. However, they still require more transparency over what results their digital marketing spends are generating, if any. The CPA model gets rid of this Achilles heel.

What’s the cost per action pricing?

Traditionally used in affiliate marketing, cost per acquisition or cost per action (CPA) is an advertising pricing model that brands are now leaning towards for influencer marketing. Through CPA pricing, the brand compensates a content creator for the number of actions they deliver. The action is generally pre-defined and can range from something as substantial as a purchase to something as nominal as comments on a post.

CPA model, the paybacks

Shorn of verbiage, the brand holds the reins in a CPA revenue model. The risks involved are much humbler because the brand rewards the blogger, instagrammer or agency only if users engage in an action. If the content evokes no response from internet users, then the company doesn’t pay a penny.

Effectively, the pricing technique guarantees that the brand gains something in return for the money expended.

Works for all brand sizes

The cost per action metric fits every brand, irrespective of size. A homegrown company with a small budget gets the peace of mind that every penny invested is on an actionable result. A multinational foraying into influencer marketing is assured that they’ll be able to quantify ROAS.

Scalable and customisable

Besides being efficient, CPA is a more scalable method for brands. And that’s not it. The brand can hand-pick the action they consider meaningful and reward the influencer accordingly. For some, it could be positively engaging with the social media post; for others, it may be filling up a form.

Perks for the influencer

The paybacks of CPA model include the influencer too. A handful of brands opt to give the creator an up-front fee and a commission for every action they drive. The influencer is driven to create more engaging content as they earn more with each new action.

Why the rise of CPA?

Typically, CPA has three entities involved a) the influencer who promotes a product or service to their digital natives, b) the brand who wants to increase sales by generating leads and c) the platform that brings the influencer and brand together. Influencer platforms or creator-first communities are critical to the rise of the CPA model.

Let’s say Binge is a food company who wishes to digitally promote their new packaged meals. They approach a creator platform to run a social media campaign. The platform then asks all the influencers in the food niche to share a post, including Binge’s packaged meal.

The brand pays the creator platform with the surety that the campaign will reach an audience at scale. Moreover, using Google Analytics and Instagram insights the platform can generate a report corroborating the footprint of the campaign giving the brand measurable outcomes.

The network gets a percentage of the campaign budget, and the influencer earns based on the actions performed by users. It is a win-win situation.

Take a tailored approach

If you can’t doubt the authority of influencers, then you can’t doubt the value of the CPA model. It indeed gives a clear picture of how influencer collaborations impact a brand’s bottom line. That said, cost per action doesn’t have a set blueprint.

Approaching the pricing technique with a ‘one-size-fits-all’ perspective ends in calamitous effect. Take a tailored approach based on your campaign objective and budget, and you’ll see the profound reach of influencer marketing.

The author is founder, Do Your Thng

Read Also: How to tackle common problems with Machine Learning Models

Follow us on Twitter, Instagram, LinkedIn, Facebook

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

BrandWagon is now on Telegram. Click here to join our channel and stay updated with the latest brand news and updates.

Next Stories
1This Diwali #MakeTheMomentPerfect, says Ferrero Rocher’s new campaign
2Syska Group announces Rajkummar Rao as its new brand ambassador
3Pepperfry launches ‘Family Times = Pepperfry Times’ campaign