Performance Marketing: CPS, CPL, CPC, CPA, CPM, and More

It’s no secret that relying on data rather than guesswork is a path to success in marketing and sales. An astounding 95% of marketers rate their data-driven strategies as successful or very successful, with the top challenges being audience segmentation and real-time decision-making.

But what if you could combine the best of both worlds, not only relying on data when strategizing your marketing campaigns but also paying for measurable results – sales, clicks, conversions – without spending on intangible outcomes?

I’m talking about performance marketing, which is likely the least risky type of digital marketing for advertisers. Even before launching a campaign, you know what outcomes you’re paying for and what will be disqualified. That’s incredibly cost-efficient.

Read on to learn everything you should know about performance-based marketing and the software you need to carry out effective lead acquisition campaigns.

“Phonexa is end-to-end software built for performance marketing and affiliate marketing teams that drive a high volume of consumer traffic. We help them track their affiliate marketing and performance marketing efforts in one place, allowing them to see their affiliate traffic alongside the different ways that their consumers are actually reaching out to them. This includes leads, calls, transactions, traffic from affiliates, and other inbound marketing sources.” – Oliver Koukoulis-Fribbens, Global Chief Sales Officer at Phonexa

Book a demo to choose the top performance marketing software suite for your business.

What Is Performance Marketing?

Unlike traditional marketing, where you might pay for non-measurable actions like placements, performance marketing strictly focuses on measurable results: clicks, downloads, installations, conversions, and anything you can track, measure, and quantify.

Traditional vs. Performance Marketing Examples

Traditional marketing example: An insurance company rents a billboard on a highway for $10,000 per month and loosely gauges an increase in website visits, inbound phone calls, and policy sign-ups. At the end of the day, though, they don’t know the campaign’s impact or whether it’s worth it because there’s no way to measure how many calls and sign-ups it generates or how many come from other marketing sources.

Performance marketing example: An insurance company launches a Google Ads campaign to generate quote form submissions, paying $2 per click to their landing page. Knowing how many clickers actually asked for a quote and then bought a policy – assume 500 out of 5,000 asked for a quote, and 100 bought a policy – it’s easy to calculate the campaign’s profitability, conversion rates (like click-to-quote or click-to-conversion), and other marketing insights.

Types of Performance Marketing

There’s no limit to possible performance-based digital marketing models as long as what you’re paying for can be measured. So, what you focus on is up to you: sales to reduce risks, leads or clicks to be more cost-effective, or even impressions to grow brand awareness.

Here are the most popular performance marketing types:

• Cost Per Sale
• Cost Per Lead
• Cost Per Click
• Cost Per Action
• Cost Per Mille

Let’s review these models individually, along with their pros and cons.

Cost Per Sale (CPS): How Much You Spend to Make One Sale

You don’t need to be a marketing expert to understand what cost-per-sale is about: minimizing risks by only paying a share of your profits to the affiliate, influencer, or whoever contributed to a sale. It’s ideal for advertisers but less appealing for affiliates, so if you’re looking for ways to amplify affiliate marketing efforts, you might have to prove you’re good at closing deals.

The imbalance is that affiliates rely on the advertiser’s sales skills, and there’s no way around it in cost-per-sale performance marketing. It doesn’t matter how many quote requests or direct phone calls you’ve generated for your advertiser if they botch the conversation.

Cost Per Lead (CPL): How Much You Spend to Acquire One Lead

While paying commissions on sales might be the least risky performance marketing strategy, you could miss great opportunities by focusing only on the bottom of the funnel. On the other hand, buying high-intent leads may prove even more profitable if you secure a good price per lead and can nurture and convert leads effectively.

Most importantly, CPL performance marketing gives advertisers significant control. In practice, whether you run an affiliate program or a Google Ads campaign, you can set strict qualification criteria for your leads – location, age, income level, and other factors a lead must match before being sold. You only pay for leads that satisfy your target parameters, with no limit to the level of scrutiny you can apply.

Read also: Leads vs. Sales – What Do You Need?

Cost Per Click (CPC): How Much You Spend to Get One Click

Unlike cost-per-sale and cost-per-lead, which are used extensively in affiliate marketing, CPC is primarily used for paid ad campaigns like Google Ads, Microsoft Ads, or Meta Ads, with advertisers bidding for clicks on search, display, or social ads. Whenever your ad appears for a specific search query and a user clicks on it, you pay for that click.

Here’s how CPC works in Google Ads:  A user types a specific search query on Google – for example, “auto insurance near me”– and an ad auction starts in real time to determine which ads will display. To participate in the auction, you set your maximum bid per click for this keyword. The system then compares your Ad Rank and all other bidders’ Ad Ranks, and the highest Ad Rank wins the top ad spot, paying slightly more than the next-highest bidder’s Ad Rank.

Here’s how CPC is calculated:

Here’s how Ad Rank is calculated:

Now let’s break down every component:

Max CPC Bid	Max CPC Bid is the highest amount you’re willing to pay for a single click on your ad for a specific keyword or ad placement. While the actual CPC (determined by the auction) is usually lower than your Max CPC Bid, limiting this parameter ensures you’re not overspending on ads.
Quality Score	Quality Score, on a scale from 0 to 10, reflects your ad’s relevance and expected click-through rate (CTR). The higher the Quality Score, the lower your CPC.
Impact of Ad Extensions	Ad extensions provide more context to your ads and entice users to click: Sitelink extensions direct users to a specific page. Callout extensions contain non-clickable text that highlights the benefits of your offer. Call extensions add your phone number so users can make an instant call. Location extensions display the address of your local offices, linked to your Google Business Profile. Price extensions show the price of your products or services. The rule of thumb is that extensions increase CTR by around 15% on average, thereby increasing your Quality Score and reducing CPC. Clicks on extensions cost the same as clicks on the ad headline.

Example: You bid $3 for “auto insurance near me” and have a Quality Score of 8, while the competitor with the next-highest Ad Rank bids $4 and has a Quality Score of 5. Your Ad Rank of 24 (3 * 8 = 24) beats their Ad Rank of 20 (4 * 5 = 20), and you pay around $2.51 (20 / 8 + $0.01 = $2.51).

It’s worth mentioning that Google Ads displays up to seven ad positions on a single search page, with up to four ads appearing above the organic search results (these get up to 50% of total clicks) and up to three ads appearing below (these get around 10% of total clicks). To gain visibility, you must find the right balance between your max bid, ad relevance, and ad extensions.

Cost Per Action (CPA): How Much You Spend to Get One Target Action

Strictly speaking, every performance marketing model mentioned above – CPS, CPL, and CPC – falls under the broader CPA model because they all involve actions: sales (CPS), contact information submissions (CPL), or clicks (CPC). However, CPA also covers less conventional actions like app installations, usage of premium tools, or webinar sign-ups.

The CPA performance marketing model allows you to go granular, running campaigns that target very specific types of leads and cost much less than CPC or CPS campaigns.

Example: If you’ve found that insurance leads convert better after downloading your insurance guide, you might be better off paying $5 per guide download than $100 per insurance lead.

Cost Per Mille (CPM): How Much You Spend to Get 1,000 Impressions

CPM is still considered a performance marketing model, even though ad views don’t necessarily mean much beyond a person potentially seeing your ad. For example, if the CPM is $5, you’re paying $5 for 1,000 ad displays on a website, app, or other digital platform.

• For display ads, an impression is recorded when the ad appears on a user’s screen (tracked via ad server pixels or tags).
• For video ads, an impression is recorded when the video ad starts playing or is fully viewed, depending on the platform’s rules.

However, an impression is counted every time an ad is successfully loaded and displayed to a user, which doesn’t necessarily mean the user clicks on it or even pays attention to it. Some platforms even record an impression if 50% of the ad is visible for one second.

Still, you can benefit immensely from CPM if used wisely. Instead of focusing on immediate sales, concentrate on familiarizing your potential audience with your brand and solutions. With thousands or potentially hundreds of thousands of people seeing your ads, you’re building potential for future conversions, although quantifying the impact may be challenging.

Example: If you’re launching a new local product or service – for example, residential solar panel installation services – you can increase visibility through awareness-focused CPM campaigns. Partner with local influencers and affiliates and display ads and banners on local solar energy websites, blogs, and social media platforms.

Take a product tour to see how Phonexa can help you reach your marketing goals.

Popular Performance Marketing Channels

Whether you pay for sales, clicks, or views, you can roll out performance marketing campaigns on your own or through affiliates and influencers. Often, a combined approach works best.

All things being equal, I recommend playing to your strengths. For example, if your team creates incredible promotional videos, it might make sense to double down on that, paying for impressions rather than leads or sales, as it’s more cost-effective.

Here are the top-4 performance marketing channels among marketers and media professionals in the United States:

Beyond these channels, more companies are using influencer marketing, with some allocating up to 15% of their budget to it. However, I recommend focusing not only on the right performance marketing model but also on the scale of the influencer you partner with.

Source: Statista

Instead of partnering with celebrities with large, low-intent audiences and charging high fees, consider promoting with micro- and nano-influencers. They charge less and usually have higher-intent customers.

Performance Marketing Strategy: How to Snatch Leads & Sales from Competitors in 5 Steps

1. Learn Your Ideal Customer’s DNA with LMS Sync and Call Logic

Smart businesses don’t just minimize lead acquisition costs by negotiating with affiliates or optimizing their spend on paid ad platforms – they first learn about their customers.

Knowing where your leads come from, what keywords trigger conversions, and how the customer journey evolves across affiliates’ and your own marketing channels means understanding who to target and how to reach them cost-effectively.

With Phonexa, you can unlock profound insights into your web and call leads with LMS Sync (web leads) and Call Logic (phone calls). Both solutions automatically track, distribute, and analyze leads in real time and against historical performance while complying with TCPA, CCPA, and other relevant regulations.

 

Take a product tour to experience the synergy of LMS Sync, Call Logic, and six other performance & affiliate marketing solutions with Phonexa.

2. Know Your Best Affiliates and Most Valuable Clicks with Lynx

In the CPC performance marketing model, it’s crucial to track how your clickers perform, not just whether they convert. Lynx does this perfectly, allowing you to measure real-time affiliate progress and identify clicks that convert into sales. You can then incentivize your most profitable affiliates and campaigns and adjust underperforming ones.

 

3. Uncover How Your Leads Behave on Your Website with HitMetrix

Unless leads call you directly, they land on your website, blog, or landing pages. This gives you a chance to track and analyze their on-site behavior and identify elements that trigger or hinder conversions. With HitMetrix, you can record on-site journeys to identify frustrating sessions for fixing, reveal trends and tendencies, and use data for compliance and auditing purposes.

 

4. Test Your Campaigns with Zero Risk with Predictive Modeling

When you need to expand or scale, you want to do so safely – ideally by running campaign simulations with Phonexa’s predictive modeling software, which pairs collected marketing data with analytical algorithms to forecast how a specific setting will perform. The best part is that you risk nothing and can run hundreds of simulations until you find the perfect marketing strategy.

 

5. Get Everything Under One Roof at a Single Price

Being able to measure and predict marketing outcomes puts you one step ahead of the competition. With Phonexa’s all-in-one performance marketing software suite, you can track every customer interaction across channels, gaining an overarching view of your organic and paid campaigns within one intuitive dashboard. No more juggling reports and systems.

“Billy.com’s experience with Phonexa has been nothing but perfect, from the hospitality that they provide when we come out here, to the resources that they give us to do what we needed to do for our operation. Right off the bat, their performance summary, which you can check on the buyer level as well as the publisher level, is huge. That’s kind of a good step one to any reporting, seeing all the different data that you can collect from there. You can find stuff that you would realistically never be able to find without their report. We couldn’t ask for more.” – Tony Schomberger, business development manager at Billy.com

Here’s another key point: A whopping 51% of marketing professionals struggle to create a comprehensive strategy with the automation software they’re using, with a similar share struggling to collect quality data and allocate budgets and resources. Phonexa solves these challenges, ensuring better data quality and accurate customer and prospect identification.

Get Phonexa’s eight proprietary solutions at a single price (online price calculator):

Build your plan now, or book a demo to learn more about Phonexa.

Frequently Asked Questions

What is performance marketing in digital marketing?

Performance marketing is an overarching term for any result-driven marketing where advertisers pay for quantifiable actions like sales, clicks, downloads, etc. Performance marketing is becoming increasingly popular as companies rely on data rather than guesswork.

From a practical standpoint, performance marketing is all about math. You know the specific results you need and how much you can afford to pay to achieve them, and you can track and update your campaigns in real time, maintaining full control over your marketing expenditures.

How does performance marketing differ from traditional marketing?

The main difference between performance marketing and traditional marketing is that the former relies heavily on data, making it possible to evaluate the direct profitability or effectiveness of marketing campaigns objectively.

For example, Phonexa’s performance marketing software suite pulls hundreds of data parameters into a single dashboard, giving you a bird’s-eye view of your marketing campaigns while allowing you to dive into specific marketing avenues when needed.

What types of performance marketing are most effective?

Search engine marketing, social media advertising, and affiliate marketing are arguably the most effective types of performance marketing. However, effectiveness depends on the industry and the internal capabilities of your marketing and sales teams.

Statistics show that U.S. performance marketers employ the following types: online display advertising (61%), paid social advertising (55%), direct mail advertising (47%), and paid search advertising (47%).