Question 1

What is the difference between CPM, CPC, CPA and ROAS?

Accepted Answer

They are four ways of expressing what advertising costs and returns, measured at different points in the chain.

**CPM — cost per mille (thousand impressions).** What you pay to have your ad shown a thousand times, regardless of whether anyone reacts. It is the underlying currency of most ad auctions, and the natural metric for awareness campaigns where the goal is being seen.

**CPC — cost per click.** What you pay for each click. Useful when the click is the meaningful step. Note that even when you are billed per click, the auction usually still runs on predicted CPM underneath — which is why a low-CTR ad ends up with a high CPC.

**CPA — cost per acquisition (or action).** What you pay per conversion, whatever you have defined that as: a sale, a signup, a lead. This is closer to a business metric, though it is only as meaningful as the action you chose. A £2 CPA for a newsletter signup tells you nothing if those signups never buy.

**ROAS — return on ad spend.** Revenue divided by ad spend, usually expressed as a ratio: 4:1 means £4 of revenue per £1 spent. The most business-relevant of the four, and still incomplete, because revenue is not profit.

**How they relate:** CPM and CTR determine CPC. CPC and conversion rate determine CPA. CPA and order value determine ROAS. A problem at any stage shows up in every metric downstream, which is why diagnosing requires looking at all of them rather than the last one.

**Where ROAS misleads.** It ignores margin — a 3:1 ROAS on a 20% margin product loses money. It ignores incrementality, crediting sales that would have happened anyway. And it ignores customer lifetime value, penalising acquisition that pays back over a year.

Many advertisers therefore work to a **contribution margin** or payback-period target instead.

Question 2

Why can a high click-through rate be a bad sign?

Accepted Answer

Click-through rate (CTR) is clicks divided by impressions. It measures how compelling something looked — not whether the click was worth having. A high CTR paired with poor downstream results usually

Question 3

What is customer acquisition cost and how do you work out payback?

Accepted Answer

Customer acquisition cost (CAC) is what it costs, on average, to acquire one paying customer. Payback period is how long that customer takes to earn the money back. Calculating CAC. Total sales and

Question 4

What is brand lift measurement?

Accepted Answer

Measuring whether advertising changed what people think — awareness, recall, consideration, favourability — rather than what they immediately bought. It exists because a great deal of advertising

Question 5

How does affiliate marketing actually work, and who gets paid for what?

Accepted Answer

A performance model where a third party — a publisher, creator or comparison site — sends traffic to a merchant and is paid only when a defined action occurs, usually a sale. The mechanics are

Question 6

What is the difference between an agency retainer, a project fee and a commission model?

Accepted Answer

Three ways of paying for marketing services, each creating different incentives — and the incentive structure, more than the headline rate, determines what you actually receive. Retainer. A fixed

Question 7

What is customer lifetime value, and how is it actually calculated?

Accepted Answer

The total profit you expect from a customer over the whole relationship. It is the number that determines how much you can afford to pay to acquire one — and it is calculated wrongly more often than

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