Compensation Models in Digital Marketing

Compensation models are used in internet marketing as a pricing system, it is how a business is charged for marketing online.

Pay Per Lead

Most companies using internet marketing will place focus mainly on leads, rates for pay per leads vary due to different advertisers and different industries, they usually pay from £2 to £20 for leads. The types of companies which use pay per lead include are usually companies which focus on a subscription based service for example; internet providers or mobile phone network providers.

Pay Per Sale

Pay per sale is commission for each time a product or service is sold. The commission is usually a percentage of the price received for the product or service that is sold. The price received usually varies similarly to most other compensation models. Compensation models are extremely common when it comes to affiliate marketing, so that each time someone sells a product or service they will receive a percentage of the products price, pay per sale is usually highly competitive and time consuming.

An example of a pay per sale, affiliate marketing campaign is trip advisor as trip advisor has many different websites that have links to their websites, Trip Advisor then will pay the website that’s link is clicked on if they make a sale. This adverts compensation model will allow it to create brand recognition due to the fact that because people will see trip advisor links on most websites when looking for holidays, therefore they will become more aware of the existence of trip advisor therefore the next time they want to book a holiday they may go directly to trip advisor.

Pay Per Click

Pay per click is the most common type of compensation model. With pay per click the internet marketers earn money each time an online advertisement is clicked on. When people create apps or websites and want them to monetized they can insert ads which will be paid by pay per click as a way of generating money. PPC ads however do not generate a lot of money as they are usually paid a few pence per click. So therefore the higher traffic that a website or app has the more money they will earn from pay per click adverts. An example of a pay per click advert is the YouTube adverts in the right corner as when you click on the advert the owner of the channel of the video you are watching will be paid a small amount for each time someone clicks on the advert. This WIX advert creates brand recognition for the company due to the fact that even though people may not click on the advert or sometimes may not even see it, it does go into their subconscious and if at any point they do want to make a website WIX is possibly going to be the first service they think of.

Pay Per Impression

Display ads and text ads usually have a compensation model of pay per impression. This is when revenue is generated based on the number of times that the advert is viewed. The pay is usually low and is mostly effective when there is a large amount of traffic on the website or wherever the advert is placed. An example of a pay per impression advert is this one from Boots that is played before a YouTube video. Every time that this advert is watched before a YouTube videos the owner of the channel will be payed a small amount. This creates brand recognition as if anyone wants to by the L’Oréal Revitalift Filler they will probably remember that Boots sell the product and therefore will look there first when it comes to buying the product.