Cost per inquiry refers to ratio between the amount spent for promotions and advertising and the actual inquiries made.
This is an effective tool for assessing the effectiveness of a campaign or promotion. Such can be deemed effective if revenue made from conversions breaks even with or surpasses advertising costs.
This is linked with per-inquiry advertising, which falls under direct response marketing. Under this setup, an advertiser is given ad space and only pays once results are achieved.
The drawback of this arrangement is that advertisers cannot choose the positioning of the advertisement.
Advertising agencies then place the ads depending on available air time or ad space. What qualifies as a result or response, however, must be agreed on by the client and the ad agency. Packages can be constructed depending on desired results, whether they be inquiries, leads, or sales.
Per-inquiry advertising is a good arrangement for companies who place greater emphasis on the results achieved by their advertisements, and not the position or time of airing. This method already serves as its own filter, as advertising costs only depend on the number of interested customers. It does away with certain advertising risks, as it gives the client more control over their return on investment.
A requirement for per-inquiry advertising to be successful is effective tracking. This may be facilitated by websites where customers can register or by providing toll-free numbers for interested parties to make inquiries.
Per inquiry advertising may also be referred to as cost per lead, pay per lead, or cost per action advertising.