Calculate Your Maximum "Cost Per Action" (CPA)
"Cost Per Action," commonly referred to as "CPA," is the success-fee that you will pay to Publishers.
For example, imagine a situation where:
- you offer a $1.50 CPA for each new mailing list subscriber
- a Publisher refers 1,000 people to your website, of which 250 actually sign-up for your newsletter, but 50 of those were existing subscribers
In that case, since you only pay a success-fee for new mailing list subscribers, you would owe that Publisher $300, based on 200 new subscribers x $1.50 CPA.
Keep in mind, the CPA does not represent your full cost. Your actual cost may be over one-third higher to pay for the services of an Affiliate Network provider as well as your own internal management costs.
So, if it's worth it to you to pay up to $12 for a new volunteer, then don't offer a CPA higher than $9, to leave room for administration costs.
However, just because you can afford a $9 CPA, should you really pay that much? For good Affiliate relations, it's better to adjust CPAs higher than lower. So, to avoid disappointing Affiliates, plan to start with a CPA lower than you can afford. If that CPA generates as many actions as you need: terrific. If not, you can later raise the CPA gradually towards your maximum, until you reach the CPA that generates enough actions.
