Introducing the CPD (Cost Per Dialogue) Model
Cost-per-dialogue (CPD), also known as pay-per-dialogue (PPD) or cost-per-discussion (CPD), is an internet advertising model used to direct consumer/buyer interest (e.g. search intent) into live chat or chatbot dialogue. In the CPD model an advertiser (e.g. a business or salesperson) pays a fee when an ad is clicked and results in a conversation (i.e. chat dialogue). The conversation can occur between a consumer/buyer/searcher and a salesperson, between a consumer/buyers/searcher and a chat bot, or a combination thereof.
The concept of cost-per-dialogue (CPD) was first proposed in 2015 by software engineer and marketer Lief Larson. Larson was seeking a solution to the challenges faced by today’s salespeople who desire to introduce their personality, experiential knowledge, and personal selling skills in real-time to today’s digital customer. Larson knew that salespeople have financial outcomes tied directly to their ability to communicate and sell to customers and that salespeople would invest to talk instantly with prospects at the earliest point possible: when the prospect signaled buying intent. Larson recognized the earliest indicator of buying intent occurred in the following ways:
via a keyword entry into search engines, the primary starting point for consumers/buyers when beginning pre-purchase due diligence (e.g. a search in Google or Bing)
via discovery at a companies website
by asking connections in social media (e.g. Can any of my friends out there recommend a good laptop, I’m on the market to buy one but don’t want to spend over $1,500)
by searching broad vertical sites (e.g. on Zillow a customer might search for types of homes by preferences like number of rooms, price, geolocation/proximity, etc. and often the listing agent for the property appears, but there isn’t a way to talk synchronously to that agent)
by searching narrow vertical sites (e.g. the lead aggregation company ileads.com created and owns over 35 niche websites on topics about mortgages, like HomeLoanAdvisor.com. It collect leads from those sites and sells them to their clients. The don’t have synchronous sales engagement there)
CPD and PPD are often used interchangeably within sales, marketing and advertising communities. PPD is used to describe the type of advertising program you are running. CPD, which stands for cost-per-dialogue (or sometimes price-per-discussion), is usually used in communicating what price you are paying per dialogue within your sales/advertising/marketing program.
CPD rates can vary wildly based on many variables, including: industry, geography, type of goods and services for sale, granularity of focus, competition, specific lead source, and more. For example, the average CPD for a consumer using a search engine to find a generic “Caribbean Cruise” may cost the salesperson $11.42 per dialogue. Whereas, the CPD rate for “VA Mortgage Chicago” may cost just $7.13.
The salesperson or their organization only pays for dialogues that occur, which minimizes upfront financial risks of under-performing advertising campaigns, such as buying advertising on a CPM (cost-per-thousand impressions) basis. The principle performance metric in the CPD model is the DTS (dialogue-to-sale) conversion ratio. That is, what percentage of dialogues result in booked sales. This can then be compared against existing CPA (cost-per-acquisition) investments via other sales/marketing/advertising techniques employed by the organization. That in turn will inform the decision whether the CPD model is viable, competitive against other competing sales channels, and provides adequate ROI (return-on-investment).
Typically CPD rates are higher than traditional CPC (cost-per-click) rates. Reasons include the fact that lead capture and sales conversion rates with dialogues are usually much higher than with mere clicks alone and thus command premium dollars. Conversion rates can be influenced by the time-to-response to consumer interest (immediacy), more thorough intervention of consumer needs and questions, as well other intangible velocity vectors such as creating personal rapport and likeability with the consumer, or the ability to overcome objections in-dialogue (read: personal selling skills), which are harder to quantify but nevertheless inherent factors in the dialogue model overall performance improvement. In short, speed combined with reduced sales friction (read: sales velocity) has warranted markedly higher CPD rates.