Cost per performance advertising applies to any media purchased on the basis of a defined action, including engagement (cost per visitor), click (cost per click), registration (cost per lead) and purchase (cost per sale). Cost per performance advertising shares the investment risk between advertiser, agency and media owner, payment is only made once the user completes a specific action. While affiliate marketing and Google AdWords are the most recognized cost per performance programs, there are a multitude of programs and publishers that offer payment on performance.

In this post I reveal the nine most significant factors to consider when launching or evaluating an existing cost per performance program that contributes incremental revenue and return on investment.

1. Remove conversion duplication.
Conversion duplication occurs when users are being reached by the same advertiser across multiple sites and tracked across different reporting systems. An Atlas Institute study entitled The Hidden Costs of Pay per Performance Media estimates the rate of duplication to be between 20% to 25%. The issues of conversion duplication is further magnified given publishers typically sell their remnant inventory to multiple ad networks and by ad-networks buying, selling and trading ads from each other to maximize reach and reduce frequency. If you are working with multiple ad-networks such as Advertising.com, Blue Lithium or DrivePM your conversion duplication increases significantly. Conversion duplication not only has a significant financial impact as advertisers over-pay for conversions but it skews media inventory optimization and investment allocation decisions.

While there is no single ad-server or site analytics solution that offers the best tracking and ad management solution across all channels, it is possible to piggy-back all third party tracking platforms into a single tracking tag. Effectively allowing advertisers to utilize their preferred channel specific platforms (e.g. BidBuddy for paid search, Trade Doublerfor affiliate marketing) while having a single de-duplicated count of conversions.

2. Focus less on the buying of media and more on the optimization of media.
Early in my career I learned that the secret to sustainable and effective online media solutions what not in the buying, but in the optimization. What you buy the media inventory for is the starting point, what you do with that media inventory is what really counts.

On-going optimization is the single most important factor is the success of a pay per performance program. In our experience, the buying model is secondary to the end return on investment metric with CPM programs at times working more effectively than CPA based programs. One way to improve optimization is by increasing the granularity of your data send your cost per performance partner multiple tracking tags as opposed to a single tracking tag.

3. Assign credit where credit is due.
It is likely your pay per performance program is based on payment to the publisher that drove the last click. While this is an accepted metric, it negates the value or contribution of everything that preceded that click. Imagine if the winning Track & Field Relay Team in the Beijing Summer Olympics was only given one gold medal the medal given to the last runner to carry the baton and cross the line. It would not be fair, given the other three runners contributed equally to the winning performance.

This is how conversions are attributed under the last click rule. For more on the last click rule read a previous post entitled “The last click gets to much credit”. If all credit is given to the last click action, it is only a matter of time until the media that drives that prospect down the conversion funnel is discarded (and that funnel becomes smaller and smaller). Furthermore, a study on online advertising has shown that click performance is the wrong measure of ad effectiveness in the long run. According to the study, 6% of the heavy clickers called “Natural Born Clickers account for 50% of all display ad clicks and cannot represent the total online population.

In a cost per performance environment it is essential to understand the role of every publisher and partner in order to make informed decisions. Exposure to conversion mapping provides the information needed to potentially weigh conversion payments, depending on the role each publisher played in driving a conversion.

4. Get in the habit of re-engaging your visitors.
When you establish a new personal or business acquaintance it is customary to communicate after the first engagement. Re-targeting users that have visited, transacted, or researched your site is key to drive efficiencies from your pay per performance program. Measuring the return conversion rate of users is a useful metric to establish a pool of valued prospects. Furthermore, re-targeting provides you with the opportunity to tell your prospects and customers a story about your brand as opposed to simply broadcasting the latest offer in hope it meets their needs.

Our work in the travel sector indicates 56% of users identify “visiting a site on the past” as the most compelling reason to purchase from a specific travel provider. Furthermore, a re-targeting program for one of our travel clients has increased click rates by 73% and revenue by ad impression served by 96%.

5. Optimize your site landing pages.
Imagine receiving a beautifully crafted and targeted invitation in the post. Your expectation is that the event will mirror the craftsmanship and value of the organizers’ invitation. Upon arriving to the event your expectations are not met, you are not properly greeted, introduced or entertained. A great invite. Poor party.The same dynamic applies to your cost per performance advertising programs and the expectations of your potential customers. While you can spend substantial resources crafting a great creative and offer, you have to invest in developing landing pages that will facilitate and fulfil the mission of your potential customer. Consider the impact of increasing your site conversion rate by 5% versus increasing your marketing spend by 25%.

6. Understand your optimal conversion window.
It is essential to determine the conversion window that provides the optimal balance between volume and cost of conversion. While the temptation is to establish a uniform conversion window for all channels including paid search, email marketing, display advertising and affiliate marketing the approach is short-sighted. The reality is that consumers interact differently with each channel; each channel fulfils a different role in driving the users through the conversion funnel. Determining the optimal post click and post impression window goes beyond deciding on a 7, 14, 21, 30 or 90 day parameter. A good understanding of your optimal conversion window can allow you to negotiate payment on post click conversions as opposed to post view conversions.

7. Differentiate between conversions from existing and new customers.
In the majority of cases cost per performance advertising agreements are driven by the volume of conversion as opposed to the quality of conversion. If your business tracks, communicates and measures the contribution of existing and new customers differently so should your pay per performance advertising program.

In my experience, all advertisers are greatly concerned with the incremental contribution of cost per performance advertising – am I paying for conversions that would have occurred regardless of advertising? Establishing a payment model that recognizes conversions from existing and new customers can help tie advertising investments to larger commercial imperatives such as market share, cost per customer and revenue per customer.

8. Focus on large ad-units above the fold.
Should you pay for conversions driven by a 120 x 60 display ad at the bottom of a publishers site? No, because size does count in pay per performance advertising. Small display ads do nothing more than “drop cookies” onto users accessing a page; with users not even viewing the ads themselves. Research indicates that larger ad formats can lift metrics such as branding awareness and message recall by as much as 25 percent, even after just one exposure. For pay per click programs such as Google AdWords set-up message groups within your campaigns; rotating different message as different times of the week.

9. Track site to call centre traffic.
Your pay per performance program needs to recognize that online is at times a tool of researching and information gathering; driving users to complete their transaction offline. Click-to-call solutions are widely used by affiliate marketing networks and offer an effective way of tracking users beyond their online interactions. Other services such as AdInsight integrate call centre data into your Google Analytics account.