Why E-mail CPA Deals Can Wreck Your Brand

Jul 19, 2006 10:14 PM  By

[Magilla Marketing] Jane Kaiser is extremely wary of cost-per-action (CPA) e-mail deals.

As far as the president of New York-based online marketing consultancy Eclipse Direct Marketing is concerned, CPA deals—where merchants pay for each person an affiliate gets to perform some sort of action such as fill out a form or make a purchase—are one of the quickest ways to trash a brand online and destroy the merchant’s ability to sell by e-mail, even to its house file.

“It’s not that CPA deals are bad; it’s that the marketer should proceed with extreme caution,” Kaiser says.

The reason: Unless they’re managed properly, e-mail CPA deals provide incentives for people selling on the merchant’s behalf to repeatedly blast every address they can get their hands on with the offer.

“Marketers want CPA deals because they don’t want to risk putting dollars toward something they don’t know is going to work,” Kaiser says. “So they decide to pay a bounty for every member or order or whatever they’re looking to accomplish.”

The problem with this setup in e-mail, according to Kaiser, is that the only way the list provider makes money is by getting people to convert.

“Many of these [CPA affiliates] aren’t spammers. They’re Can-Spam compliant, they abide by the rules, they use suppression files and do everything they’re supposed to do within the letter of the law,” she says. “Unfortunately, ISPs have a different law.”

User complaints are the number-one criterion ISPs use to determine if incoming e-mail is spam. But simply sending too much e-mail can also get the sender flagged as a spammer. “Anyone can look like a spammer [to an ISP] if they flood the Internet with e-mail, and looking like a spammer is just as bad as being one,” Kaiser says.

Moreover, not only will the ISP flag the IP address sending the mail, it will flag the content of the mail and treat any e-mail that contains it as spam.

As a result, the marketer whose offer has been flagged as spam may be blocked from reaching its own customers.

“Now e-mail to their house file—their bread, their gold, the people they want to retain—is either being blocked or going to the bulk folder,” Kaiser continues. “They [the marketers] are not only hurting their [online] acquisition efforts, they’re severely impacting their e-mail house file, and that is the biggest problem with CPA deals.”

Take the example of the executives launching an unnamed continuity club who thought they could drive sales using e-mail CPA deals. “They ended up on every major blacklist within a three-month period because of the way they were marketing, and they weren’t spamming,” Kaiser says. “They were using sources that were high volume. They weren’t doing anything illegal, but they weren’t complying with the ISPs’ rules.”

So is e-mail acquisition worth the hassle? Absolutely, according to Kaiser. “I’ve been using e-mail successfully as an acquisition tool for six years,” she says. “People who buy on the Internet might not be the same profile as someone who buys from your catalog, which means if you’re not speaking to people online you’re leaving money on the table.”

Also, the average order size from online buyers is usually at least 25% higher than that of offline buyers because the Internet makes it so easy to add to a purchase, she notes.

Kaiser adds that marketers shouldn’t necessarily avoid CPA deals. The trick is to remove the incentive for affiliates to flood the Internet with offers.

“There’s a place for CPA, but it needs to be monitored,” she says. One possibility is to pay affiliates on a cost-per-lead basis on soft offers but limit the number of leads the marketer will buy from the affiliate per month.

“This way you’re limiting your risk,” Kaiser says. “If the leads don’t convert, you haven’t risked too much.”