Cost Per What?!

I like David Berkowitz’s post on Social Media Insider about “CPSA” because it prompts an important discussion about pricing models.

In proposing the possibility of “CPSA” – Cost Per Social Action – Berkowitz recognizes the fact that “social networking, when done right, achieves something much different” from the current pricing models, Cost Per Impression (CPM), Cost Per Click (CPC), and Cost Per Action (CPA). Cost Per Engagement (CPE) gets closer, says Berkowitz, but still falls short.

The big difference, says Berkowitz, is that social marketing is all about relationships, and no one has figured out just yet how to put that in a neat little box. It is much more grey than it is black and white. Berkowitz himself acknowledges that the notion of “CPSA” has so many downsides it may be all but impossible to implement. For example, how do you even decide on common criteria when you’re trying to measure the impact of Facebook vs. MySpace vs. Twitter vs. any other social media, when each of them has a uniquely different twist and, as a result, require different metrics?

Whether or not CPSA is plausible is less important than the point that Internet marketers should be thinking creatively when it comes to new pricing models. In fact, marketers should be thinking about pricing issues even as they’re developing new media options.

One of the interesting problems with Internet-speed marketing is by the time someone figures out how to make money off of something, the entire paradigm changes. That’s why anticipating market conditions is essential.

CPM is based on traditional media costs, using television, radio, magazines, and newspapers as the model. It’s easy to figure out because it is all about reach. CPC and CPA are derived from direct marketing. Direct marketers count inquiries or orders to measure their ROI. Pretty simple metrics.

Social marketing could turn the revenue impact of the Internet on its head. Adoption of CPSA style pricing models could herald the same evolution that happened when the advent of database marketing made direct marketing more sophisticated, and the industry adopted “relationship marketing” as its mantra. That caused direct marketers to reconsider measuring merely inquiries and orders, and start measuring the long-term value of the customer.

Gadzooks, this is not really that much different from what Berkowitz is talking about, is it? Seems the more things change, the more they remain the same.

About Barry Silverstein

Barry Silverstein is a freelance writer/marketing consultant. In addition to writing for ReveNews, he is a contributing writer to Brandchannel.com, the world’s leading online branding forum. He is the author of three marketing books, The Breakaway Brand (co-author, McGraw-Hill, 2005), Business-to-Business Internet Marketing (Maximum Press, 2003) and Internet Marketing for Technology Companies (Maximum Press, 2003). Barry ran his own Internet and direct marketing agency for twenty years. You can find Barry on Twitter @bdsilv.

9 Responses to Cost Per What?!

  1. I'm really enjoying your take on this. Yes, a lot of this relationship building isn't all that new, but much of it is all the more powerful, especially when marketers are taking a long-term view rather than just using these new tools to rack up body counts.

  2. Barry Silverstein says:

    Thanks for reading my post about your post, David! I think it's important for everyone to start taking a long-term view rather than look to the short term. Internet marketers are just as capable of strategic thinking as traditional direct marketers — but sometimes they may forget that while the media is new, the principles are the same.

  3. Barry and David, I think we have a case here of measuring the black "stuff" in space. Considering we can't measure everything but can track responses, testimonials, referrals and such, I see the basics, of course, however, more emphasis in loyalty and long-term engagement—how long do they remain customers.

    Thanks for the insights.

  4. Pat Grady says:

    Digging for meaning via exploration of better measurements is a delightful thing for me to see! The cycle of development of any marketing reach, from newborn to adoption to maturation and optimization, is a natural progression. I wasn't consciously waiting for it, but the timing of your article here, and its unhype frankness and pragmatic nod seems to pluck at my resonance chords. I look forward to seeing if you report on any advanced, complex or algorithmic efforts anyone may be making to incorporate the angles you mentioned – i bet there are folks doing it, modeling hybrid measurement techniques for correlation to social activities impact, trying to cope with the many intrinsic differences you mentioned.

  5. […] Cost Per What?! Barry Silverstein is blogging about David Berkowitz’s post on Social Media Insider. Barry says, “In proposing the possibility of “CPSA” – Cost Per Social Action – Berkowitz recognizes the fact that “social networking, when done right, achieves something much different” from the current pricing models, Cost Per Impression (CPM), Cost Per Click (CPC), and Cost Per Action (CPA). Cost Per Engagement (CPE) gets closer, says Berkowitz, but still falls short.” […]

  6. […] Cost Per What?! Barry Silverstein is blogging about David Berkowitz’s post on Social Media Insider. Barry says, “In proposing the possibility of “CPSA” – Cost Per Social Action – Berkowitz recognizes the fact that “social networking, when done right, achieves something much different” from the current pricing models, Cost Per Impression (CPM), Cost Per Click (CPC), and Cost Per Action (CPA). Cost Per Engagement (CPE) gets closer, says Berkowitz, but still falls short.” […]

  7. please sir i have read through your post and like to know much about cpa.thank you

  8. Barry Silverstein says:

    Daniel: "CPA" is Cost Per Action, sometimes defined as Cost Per Acquisition. Basically, it means the cost associated with an action that is taken by a responder. In the online world, CPC (Cost Per Click) is clicking through an ad to an advertiser's web page. The action taken by the responder is after the click occurs. The action could be filling out the information requested on a form, providing an email address to sign up for an e-newsletter, completing an online survey, ordering a product online, etc. Therefore, "CPA" is a measurement of the cost associated with that particular action. Hope this helps.

  9. Perhaps its time to rethink "cost per engagement" the same way as some of us thinks about ROI and ROE

    http://theonlyconstant.wordpress.com/2009/09/04/c

    / Hampus