Of course, it’s hard not to focus on a metric such as a Cost Per Click (CPC). For one thing, it stares you in the face every time you do keyword research or adjust your bidding. Oh, Yes! This term costs Kshs. 10,000 per click. While at the same time, that term costs Kshs. 2,000.
Your real focus should be on a Cost Per Acquisition (CPA) and maintaining a solid Return On Investment (ROI) as well as the Return On Marketing Investment (ROMI). So, How much does it cost you to acquire a customer relative to your profit margins?
If it’s still positive, there is no reason not to pay more. In fact, paying more per click can help you rank higher in the bidding process. For more and more customers will be able to find you, driving tons of sales at a price that still gives you a great profit.
Read Also: Landing Page SEO Webmaster Guides
Therefore, Cost Per Click isn’t something to fear. Rather, it’s something you should want to spend more on. And since AdWords exists for one reason; to generate fast, profitable sales for your business. In short, paying more per click can often lead to this exact, positive side effect.
Not forgetting, the Cost Per Click is industry-specific for a reason. More often than not, it makes sense to pay a bit more.
What Is Cost Per Click?
Cost Per Click (CPC) is a paid advertising term where an advertiser pays a cost to a publisher for every click on an ad.
CPC is also called Pay Per Click (PPC). And it’s used to determine the costs of showing users ads on search engines. Like, Google Display Network for AdWords, social media platforms and other publishers.
Important to realize, CPC is a significant factor in choosing bidding strategies and conversion bidding types. Especially, to maximize clicks relative to the budget size and target keywords.
There are a variety of text, rich-media or social media ads that use CPC as a factor in calculating total paid advertising campaign costs. Some ad types are only displayed on certain networks.
Such as the Google Search Network (ads at the top of Google’s search engine result pages) and Display Network (Google-owned or partnered sites like YouTube and Gmail).
CPC is a factor in ad types including:
- Text ads,
- Shopping ads,
- Image ads,
- Video ads,
- Twitter promoted tweets,
- Facebook ads,
- Instagram ads,
- LinkedIn ads,
- Pinterest ads, etc.
Why Is Cost Per Click Important?
Cost Per Click is important because it is the number that is going to determine the financial success of your paid search campaigns, and how much Google Ads will cost for you.
Your return on investment, whether you’re over- or underpaying for each action, will be determined by how much you are paying for clicks. And also, by what kind of quality you are getting for that investment.
Since the overall ROI of your campaigns is determined by how much you’re paying for clicks and the quality of traffic they’re bringing in, it is important to think about cost per click in terms of both cost and value.
After all, you want to identify and target clicks that are both inexpensive and valuable.
How Do I Calculate Cost Per Click?
The Cost Per Click is calculated by dividing the cost of a paid advertising campaign by the number of clicks.
If you want to use a popular online advertising tool like Google AdWords and bid on keywords in order to display paid ads, these tools will often show CPC for target keywords.
Cost Per Click = Advertising cost/number of clicks
Related metrics that involve CPC include average cost per click and maximum cost per click. Within paid advertising platforms like Google AdWords, there are certain strategies.
Like enhanced cost per click and manual cost per click bidding that marketers may want to utilize depending on their goals.
What is the average cost per click?
The average cost per click is the average an advertiser spends for every ad click.
Average CPC = total cost of clicks / total number of clicks
An elegant CPC formula
As an advertiser, your cost per click will always be less than or equal to your maximum bid, as it is an average of bids against a series of competitors over a period of time.
What is the maximum cost per click?
The maximum cost per click is the highest amount you think a click is worth and the highest you want to pay. However, the maximum CPC set may not be the amount you actually pay for the click.
Google recommends setting the maximum CPC to $1 in AdWords. That is if you are unsure of what to choose for the highest amount per click.
What is the manual cost per click bidding?
Manual CPC bidding is when advertisers set the maximum CPC for each ad by hand in contrast to automated bidding strategies.
What is the enhanced cost per click?
Enhanced cost per click is an automated conversion bidding strategy in Google AdWords.
Particularly, for certain types of ads that appear on Google’s Search Network and Display Network.
Enhanced CPC is used if your goal is to maximize ad conversions.
Pros of Measuring Cost Per Click
- Meet goals to drive traffic. Attract more customers to your sites or stores by paying publishers to display ads where your target audience is likely to frequently visit.
- Measure CPC metrics to improve paid advertising campaigns. Compare the cost of paid advertising campaigns to revenue generated or other metrics by calculating CPC.
- Determine which ad types to use. If you find CPC is not paying off for certain ad types, shift your budget to ad types that generate higher revenue or traffic.
- Choose manual or automated bidding strategies. If you have a good understanding of your business, audience and paid advertising strategies for CPC, you could choose to automate your bidding strategies so you can focus on other things.
Lowering CPC While Maintaining Value
So how do you go about lowering the price you’re paying for each click, while sustaining (or even improving upon) the value of your visits?
Two key paths of action come into play here:
Raise Your Quality Score
Google has created an automated system that offers pricing discounts to well-managed PPC campaigns with high-Quality Scores.
Currently, accounts with quality scores of 6 or higher (the average score today is 5) are granted a 16-50% decrease in CPC, whereas accounts with a 4 or lower Quality Score see a 25-400% increase in CPC!
Boost your chances of a drastically discounted cost per click by adhering to Quality Score best practices:
- Increase click-through rates (CTR) by creating compelling, relevant ads.
- Build out closely related ad groups.
- Optimize ad text and landing pages that speak to individual search intent.
Expand Your Reach
By discovering new, relevant and valuable clicks, the distribution of your budget will be improved substantially.
To do this, you’ll have to find new PPC keywords and search for advertising opportunities. But, you can’t just expand without also paring back.
So, you need to simultaneously eliminate irrelevant or overpriced clicks from your campaigns.
Refine Your Reach
And so, as you add new keywords to your AdWords account, be sure to eliminate the losers. When you target only keywords that perform well and are relevant to your business, it ensures that:
- Your spend is protected – Lowering your cost per click isn’t useful if you’re paying low prices for irrelevant clicks. Negative keywords tell your PPC campaigns which term not to target, therefore reserving your budget for relevant terms only.
- Your Quality Score improves – If your keywords are clearly related to your ad text, landing pages, and offers, your click-through rate, and other Quality Score factors will be positively affected. This gets you more cost-efficient clicks (remember, up to a 50% decrease in CPC!), and on search terms that are more likely to convert.
A low cost per click is key to PPC success because it ultimately translates into your cost per conversion.
I hope the above guide was useful in your preparation for your brand, business or even product marketing campaigns.
However, if you’ll have additional information, contributions or even suggestions that demands our attention, please Contact Us. And by the same token, you can share your thoughts in the comments box below this blog post.
All in all, below are more useful and related topic links that might best interest you.
- How do you calculate ROMI?
- What is Search Engine Marketing?
- Why is Video Marketing important?
- Lead Conversion: 18 Key Terms Marketers Should Know
- B2C Marketing: Business Models Used In Digital World
- B2B Marketing: The Key Strategic Guidelines For Marketers
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