Pay Per Customer vs. Pay Per Click: Which is Better for Your Business?
When it comes to online advertising, there are two popular payment models:
Pay Per Customer & Pay Per Click
(the latter is more commonly known as PPC advertising)
Both have their advantages and disadvantages, and choosing the right one for your business can be a challenge.
In this article, we'll explore the differences between pay per customer and pay per click, and help you decide which one is the best fit for your marketing strategy. Our top headings will be:
- What is pay per customer advertising?
- What is pay per click advertising?
- Pros and cons of pay per customer advertising
- Pros and cons of pay per click advertising
- Factors to Consider When Choosing Between Pay Per Customer and Pay Per Click
- Making the Right Choice for Your Business
What is Pay Per Customer advertising?
Pay per customer advertising is also commonly referred to as CPA (cost per acquisition), pay per lead, commission based marketing, cost per conversion, performance marketing or affiliate marketing.
Pay per customer is a model where advertisers only pay when a customer completes a desired action, such as making a purchase or filling out a form. The marketer, in this instance, is an affiliate who promotes the advertisers products and/or services in exchange for a commission for successful conversions.
The word affiliate means to be affiliated with. Affiliates within this marketing structure are sales people / ambassadors of your brand, meaning you do not employ them directly, but you agree to pay them a commission for any sale they generate on your behalf.
These affiliate commissions can be based on a percentage of the total sale or a flat fee for every sale. Some advertisers offer affiliates bonuses for hitting certain volumes, too.
What is Pay Per Click advertising?
Pay-per-click advertising is a form of digital advertising where advertisers pay a fee every time someone clicks on their ad. This type of advertising is commonly used on search engines, social media platforms, and other websites to target specific audiences and keywords.
You have more than likely experienced or seen Pay Per Click advertising in your day-to-day life, but we've listed the most popular services below:
- Google Adwords (cost per click)
- Google Shopping (cost per click)
- Google Display Network / AdSense (cost per click or cost per mille)
- META ads (cost per click or cost per mille)
- Reddit ads (cost per click or cost per mille)
Advertisers bid on the cost of each click for their ad placement, with the highest bidder typically getting the most prominent ad placement. The aim of PPC advertising is to drive targeted traffic to a website, generate leads, and increase conversions and sales.
Figure 1: top left
Searching Nike Trainers into Google Search brings up 2 x ads. One from Nike and one from FootAsylum. Both brands are advertising and bidding to be at the top of the search rankings. This is called Google Adwords and advertisers pay every time someone clicks on one of these ads, no matter whether they purchase that product or not.
Figure 2: top right
Searching Nike Trainers into Google Search brings up a variety of keyword based Google Shopping ads. These ads run in the same format of pay per click as Google Adwords, but tend to be 300% more expensive per click that Google Adwords, due to the extra content provided by the search engine. Google Shopping is another form of pay per click.
Figure 3: bottom
Now that Google has sensed I'm in the market for Nike Trainers, they are now targeting me on news & media sites that host reviews of Nike Trainers. New Balance are advertising their trainers to me through a service called Google Adsense, which places ads around websites on the website owners behalf. These ads are charged either per click or per mille (thousand) impressions.
Pros and Cons of Pay Per Customer Advertising
Pay Per Customer advertising has huge advantages, but some disadvantages, such as only paying for conversions, but the potential for lower volume is much greater. This makes it the ideal choice for brands looking for a low-risk form of marketing option. We've listed all the pros and cons below:
Pros of Pay Per Customer Advertising
- No money required to start advertising
- Very high conversion rate (800% higher than pay per click)
- You only pay when your website converts
- Gain backlinks to your website which in turn, increases your websites trust rating
- Harbour relationships with social media and website affiliates for the future
- Even if you don't get many conversions, it's a great way to gain brand awareness for free
Cons of Pay Per Customer Advertising
- Pay commission on every sale generated
- Uncertainty on volume of traffic
- If you don't control the affiliates in your program, you may end up on multiple discount code websites
Other sites may list other cons, such as lack of control - but we don't agree with this con. Avelon's platform has been designed to put the brand in full control of all their affiliates.
Pros and Cons of Pay Per Click Advertising
Much like Pay Per Customer, Pay Per Click also has its pros and cons. If you spend the time, know your market, know how to market to your potential consumers and have the budget, Pay Per Click Advertising can be an high turnover form of marketing for your brand.
Pros of Pay Per Click Advertising
- Virtually guaranteed traffic with forecasting and estimations on conversions through Google Ads and Social ads
- Cost per conversion can be very low if your price is right
Cons of Pay Per Click Advertising
- Requires deep pockets to get started and get results
- Hard to outbid larger companies
- You may never see results if you don't monitor competitors prices
- Erodes your profit margin
- Very labour intensive
- High volatility - if you stop paying for clicks, you immediately stop getting conversions
Making the Right Choice for Your Business
If you've got the resources, you can start both Pay Per Customer and Pay Per Click advertising and monitor them both successfully. Both take some time to set up, but once you're up and running, you just need to monitor and refine over time.
However, if you want to dive head first into one or the other, we'll outline which is best for you.
Who is Pay Per Customer best for?
Originally, Pay Per Customer was designed for Business to Business but has grown to service all aspects and facets of businesses worldwide, including eCommerce, D2C and even service providers.
Business to Business / B2B / Client Services
The Pay Per Customer model is perfect for businesses who require clients or leads to increase revenue. You'll more than likely be working with Agency Partners who act as a sales person on your behalf, than any other type of Affiliate marketer.
Using Pay Per Customer as a business owner in this space is ideal if you're looking to continuously add new clients to your books and have a timeline and Standard Operating Procedure (SOP) for onboarding new clients. If you don't, then affiliates may not want to work with you, as their time is incredibly valuable and should be spent networking.
These affiliates literally just want to have the conversation with the potential client and then make the introduction to you, which needs to convert into a paid contract. For this type of marketing to work, you should be looking for a 35-40% conversion rate.
These Agency Partners will require some training and you need to provide them all the right sales tools, as you would any other sales person. This is the most labour intensive part of the journey, but can be incredibly rewarding if you work with the right one.
Agency Partners' commission varies depending on your business, but the most commons are one off payments per confirmed lead or ongoing payments for consistent clients.
One off payments will be higher upfront costs per client and ongoing payments (whilst the client is actively working with you) will cost less per month, but can add up to way more payments to the affiliate over time.
Recommended affiliate type: Agency Partners
Retailers & Direct to Consumer (eCommerce)
Currently, retailers and direct to consumer (eCommerce) businesses are at the forefront of the Pay Per Customer industry. They have the choice to work with News & Media sites, content affiliates, email marketers, PPC affiliates and even coupon websites.
If you want to built brand awareness and grow your brand, Pay Per Customer is the perfect choice for you. Low-risk, no overheads and you get to build a new customer base off the back of an affiliates hard work, whilst you focus on the core fundamentals of your business. What's not to like?
News & Media Sites work best when you provide them with all the information. Consumers go to these sites such as BikeRadar or Cyclist (yes, very cycling themed here) looking for impartial reviews at the latter stage of their buying journey, so you may have to send them press releases and even gifted product. Content affiliates also fit within this category of providing all the required information.
PPC affiliates are a strange bunch in this realm, as they actually do the Pay Per Click marketing for you. Whilst they don't charge for the cost of advertising, their commission percentage is incredibly high and can erode your profit margin entirely.
Recommended affiliate type: News & Media sites, Content Affiliates, Email Marketers, PPC Affiliates and Coupon Websites
Who is Pay Per Click best for?
Pay Per Click is suited for every business looking to get infront of potential clients / consumers. The only drawback? You'll need deep pockets to penetrate the market and nerves of steel to keep it going. There's no guarantee this form of marketing will work and if you don't monitor it, you'll get the nasty sting of low conversion rates and high CPAs.
How to get started with Pay Per Conversion
Getting started with Pay Per Conversion is as simple as signing up to Avelon, which unlike other affiliate platforms, is 100% free for brands and takes just 30-seconds to sign up!
Read our ultimate beginners guide to affiliate marketing below: