The cost-per-order model makes it possible to link payment for advertising directly to a purchase transaction. Website operators therefore only pay for advertising that leads to a purchase.
Cost-per-order in online marketing
Cost-per-order is a payment model used in online marketing whereby money is only transferred to the advertising platform if a user makes a purchase after clicking on an ad. The purchase needs to be made within a certain period of time of them clicking on the ad in order for a commission to be charged.
Advantages of the cost-per-order model
The advantage of CPO is that a commission only has to be paid if a site visitor places an order within a fixed period of time following their interaction with an advert.
In this way, the advertiser is exposed to a lower financial risk than is the case, for example, with cost-per-action (CPA). The advertising can thus be included as a fixed cost component when calculating the profitability of promotional campaigns.
Disadvantages of cost-per-order
Since advertisers pay in advance to a certain extent for traffic with the CPO billing model, they are very keen to optimise the performance of their own advertising inventory. For website operators, this means ensuring that the landing page of the CPA advertising campaign is well optimised from an SEO and conversion optimisation point of view, in order to generate the maximum amount of sales.
If, however, you neglect your landing page, what can happen is that advertising networks no longer offer CPO campaigns.
CPO compared to CPC and CPA
Cost-per-order, like cost-per-click and cost-per-action, refers to a payment model. CPO is similar to the CPA model, with the difference being that the actions taken are orders. These models both differ from the cost-per-click model, as it is only the clicks that result in an order which are paid for with CPO and CPA.
Can I set up CPO campaigns in AdWords?
Unfortunately, Google does not offer this option. However, it is possible to use the target CPA bidding strategy in AdWords. This involves setting a target value for the cost of the order; it is important that you read the small print here! This bidding strategy can allow advertisers to reduce their CPC costs and increase their conversion profits. You can find out more about this in Google’s AdWords Help Centre.
If the billing method is suitable for the advertising network that is being used, cost-per-order can be an excellent remuneration model. However, by linking the costs to the purchase, website operators have to take a much closer look at their landing pages. How are they structured and how well are they performing?
On the one hand, this is more time-consuming, but in most cases it should have a positive effect on your website. It is no longer economical to simply create a landing page without taking the time to evaluate how it performs. And the insights that you gain from analysing this page’s performance can help you to formulate a strategy for the entire domain.