How Your CPA Could Harm Your Sales

Discover why setting a low cost-per-acquisition (i.e. payout) isn't just bad for affiliate marketing campaigns, but could also damage valuable relationships. We explain how to balance CPA with key data and introduce you to a payout calculator to help optimize your strategy.

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The CPA Dilemma

Many brands try to cut costs when starting affiliate programs, often by setting the CPA as low as possible. While this might seem like a good way to save money, it can actually hurt your bottom line and your relationships with affiliates.

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The Pitfalls of a Low CPA

Undermining Affiliate Relationships

Affiliates drive sales and bring in new customers. Offering a CPA that's too low will demotivate them. Many affiliates, especially media buyers, spend their own money to run ads, so they need to know that the campaigns they’re investing in will justify the risk. A low payout discourages initial testing and can prevent the possibility of any future collaborations as well.

TIP: Use our CPA Calculator to help align your CPA with industry standards and your specific marketing goals.

Risk of Being Overlooked

In the growing landscape of E-commerce, your offer needs to be competitive—not just in unique selling points, but in how you compensate partners for the sales they bring. A CPA that's significantly lower than the Average Order Value (AOV) or market rates is bound to be ignored by prospective partners. Affiliates prioritize campaigns that offer fair compensation; a low CPA might lead them to partner with your competitors instead.

To stand out in the ultra competitive eCommerce crowd, your offer must be attractive. A CPA significantly lower than the average order value (AOV) or market rates will be ignored. A CPA that doesn’t align with or surpass the Customer Acquisition Costs (CAC) will also be ignored, since there’s no opportunity for the affiliate to succeed. Affiliates choose campaigns with fair compensation, and a low CPA might send them to your competitors.

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Balancing CPA and Incentives: A Strategy for Success

Setting Competitive CPA Rates

Your CPA should cover the affiliate's commission and be enticing enough to encourage promotion.  Use metrics like Customer Lifetime Value (LTV), CAC, and AOV. A well-calculated LTV allows for higher, yet profitable, payouts.  Aligning your CPA with internal CAC—including organic and repeat customers—keeps payouts realistic.

For campaigns driven by one-time purchases, AOV becomes a critical determinant, directly influencing how much you can afford per acquisition to secure a profitable margin.

This balanced approach attracts high-quality affiliates and drives sustainable growth.

Try Variable Payouts

It can be difficult to price exactly right out the door, but also keep in mind that it’s typically easier to negotiate with partners once they’ve already experimented with your campaign.

For that reason, brands tend to introduce a range where they can progressively incentivize affiliates based on their performance. This could include bonuses for hitting certain sales thresholds or improved rates after a trial period.

Build Rapport with Test Budgets and Rewards

Test budgets help affiliates who spend their own money to validate performance metrics whether a campaign can be profitable. Upfront payments reduce the risk of promoting untested offers and attract new partners. Incentives like cash bonuses motivate high-performing partners. These additions to your payout create stronger, more enthusiastic collaborations.

We're big fans of mixing things up with test budgets and performance incentives via Boosts.

By adding these sweeteners on top of your payout, you're not just lowering risks for your partners, you're setting yourself up for more fruitful, enthusiastic partnerships.

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Turning High CPAs into Profitable Strategy

Harness the Power of Halo Sales

Even though you only pay for direct acquisitions, your brand benefits from increased awareness. Track how affiliate-driven traffic boosts your brand across channels like organic, direct, and social. This often reveals an uplift in overall sales, justifying a higher CPA. For example, Squaredance brands see a 22-25% channel lift on Amazon and Search with active partner programs.

Boosting AOV with Strategic Upselling

Increase AOV by planning the buyer's journey from discovery to post-purchase. Provide affiliates with various offer models to test so they can determine the most effective for their audience—for instance, comparing the performance of a 1-2-3 bundle against a 1-3-5 bundle. Upselling techniques like offering one-time discounts on complementary products at checkout can also encourage higher spending. This approach not only helps counterbalance higher CPAs but also crafts a more engaging shopping experience that encourages customer loyalty.

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TLDR; Use a Balanced Approach to Payouts

• Low CPAs hurt affiliate partnerships, reduce visibility, and lead to lost sales.
• Balance CPA with data like LTV, CAC, and AOV for competitive, realistic payouts.
• Use tools like a CPA calculator, offer variable payouts, and provide test budgets.
• Remember the indirect benefits, like halo sales, and use upselling to boost AOV.
• A good CPA strategy invests in the affiliate ecosystem, expanding your reach for a win-win partnership and sustainable growth.

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