How to decide what to pay when posting jobs on a CPA basis

“Back in the day”. Say that and the world instantly knows you’re old. Yet another expression also holds true, “With age comes wisdom”.

In the world of online job advertising, almost everyone who has been around for any length of time is familiar with traditional, duration-based pricing. Most job boards globally still operate this way by charging something like $200 for a job posting that will run for 30 days. In some markets like Germany, it isn’t unusual to see employers paying five, six, or even seven times the equivalent amount in Euros as there’s historically been a mismatch there between the demand for postings and the supply of good sites on which to post jobs. Fortunately, at least for employers and candidates, that’s changing as more and more job boards are launching and the small cohort that used to dominate no longer does.

The added competition in Germany and other markets isn’t just leading to lower pricing. It is also leading to different pricing models. Instead of employers only being able to advertise on a traditional, duration-basis, they’re now also able to advertise on a cost-per-click (CPC) and cost-per-application (CPA) basis. College Recruiter is just one of dozens of well-regarded, high-traffic job boards that sell postings in Germany and just about every other major market using a hybrid business model, meaning that employers can choose between paying on a traditional, duration-, CPC-, or CPA-basis.

The question from employers who are at least considering advertising their early career and other job opportunities on a CPA basis is how much should they pay per application and how much should they budget per posting? Let’s tackle the second question first, as it tends to be easier to answer.

Let’s assume for the sake of discussion that the employer decides to pay $25 per application. That’s a pretty normal number, by the way. How much to budget for the posting is quite simply a function of how many applications the employer wants to receive, and that’s driven by two factors: (1) how many applications they typically receive for every person they hire into the role being advertised and (2) how many people they’re looking to hire into that role. Across all employers, all jobs, and all job boards, the number of applications per hire averages around 20, so about five percent of applications convert into hires. If you’re only looking to hire one person, then you’re going to want to budget $25 per application times 20 applications, so $500. But if you want to hire 10 people into the same role, then you’re going to want to budget $500 times 10 people, which is $5,000.

Back to the key issue of how much to pay per application. When employers opt for job posting ads on a CPA basis from job boards, there are several key factors to consider in determining how much to pay per completed application. Careful consideration is required to ensure the cost-effectiveness and quality of candidates. Here are some factors to weigh:

Quality of Candidates: The primary consideration should be the quality of the applicants. Generally, the more you pay the job board on a CPA basis, the more prominently your ad will run. The more prominently your ad runs, the more candidates will see it. The more candidates who see it, the more will apply to it in a given period. But that’s all about quantity and not quality. Interestingly, what we often see in terms of quality is the same: the more you pay per application, the better the quality of the applicant. Why? Because the higher CPA tends not to be the only difference. Employers who pay more per application have more at stake when it comes to those applications. They tend to be more thoughtful about the role, the audience they want to target, the ad, the hiring process, and more. The more they spend, the more they care. The more they care, the better they market the role. The better they market the role, the better the quality of the applicants.

Industry and Job Complexity: Different industries and roles have varying levels of application complexity. For specialized or high-level positions, you may need to pay more due to the smaller pool of qualified candidates. We recently compiled CPA ranges and averages for about two dozen of the most popular occupational fields and published that to this blog.

Market Demand and Supply: Understand the labor market for the specific role. If the role is in high demand but with a limited supply of qualified candidates, you might need to pay more to attract the right applicants.

Employer Brand and Position Attractiveness: A strong employer brand or an attractive job position can naturally draw more candidates, potentially allowing you to lower the cost-per-application rate.

Application Process: A lengthy or complex application process can deter applicants. If your process is streamlined and user-friendly, you might be able to reduce costs while still attracting quality candidates.

Historical Data and Benchmarks: Analyze historical data from previous postings. Understanding what worked in the past can help set a realistic and effective price point.

Job Board’s Reach and Reputation: Consider the job board’s reach and reputation. Well-known boards like College Recruiter with a broad or targeted reach might warrant a higher cost due to their ability to attract a diverse pool of candidates.

Urgency of Hiring Needs: If you need to fill a position quickly, you might be willing to pay more per application to expedite the process.

Budget Constraints: Be mindful of your budget limitations. It’s essential to balance the cost with the expected return on investment.

Feedback and Adjustment: Be prepared to adjust your strategy based on the response. If the cost-per-application rate isn’t yielding the desired results, consider revising your approach.

By considering these factors, employers can make informed decisions about how much to pay per completed application when using a cost-per-application model for job postings. This approach requires balancing cost with the quality and quantity of applications, ensuring that the investment leads to the hiring of suitable candidates.