What is CPC? Cost-Per-Click in Advertising

cost per click

What is CPC? Cost-Per-Click in Advertising

Digital marketers look at a wide range of metrics to measure their marketing and ad campaigns. One of those metrics is CPC, which stands for cost per click. CPC measures the cost per each individual click in a pay-per-click (PPC) advertising campaign.

The cost per click can change based on various factors. There are steps you can take to lower the CPC of your ads, thus saving money and improving ROAS, increasing ROI for your marketing efforts, and helping to generate more leads or sales while staying within your advertising budget.

CPC Meaning

As previously stated, CPC is an acronym for cost per click. This measures how much an advertiser would pay for each link click in a PPC (pay-per-click) advertising campaign. When running a PPC campaign, advertisers bid a certain amount that they are willing to pay per click. CPC is always less than or equal to that maximum bid.

CPC is usually determined based on your maximum bid per click, the Quality Score of your ad, and the ad rank of other competitor ads targeting the same keywords. Search engines like Google, the most popular platform for PPC ads, place ads by giving each one a Quality Score based on how relevant and well made the ad is, and by factoring in CPC.  

Ultimately, cost per click can be influenced by various factors. The CPC bid is a factor that determines Ad Rank, which is how Google ranks different ads applying for the same keywords. CPC is then calculated by taking a competing ad’s Ad Rank, dividing by your ad’s Quality Score, and adding 0.01. The formula looks like this:

(Competitor Ad Rank / Your Quality Score) + 0.01 = Actual CPC

This means that the higher your Quality Score is, the cheaper your cost per click. Because of this, it is vital to test different ads and always work to improve Quality Score. The best ads have the lowest CPC, which results in more clicks at a lower cost, improving the overall profits of your campaign.

What Is A Good Cost Per Click?

You may be wondering how much you should be paying per click. It’s hard to say what a “good” cost per click is – it depends on the quality of the click and how much you stand to gain with each click. Depending on how high your conversion rate is, PPC campaigns can be a waste of money or wildly profitable.

Consider some numbers: let’s say that your CPC is $2,  the service you sell is worth $100, and your conversion rate is 25%. If one in four clicks (25% conversion) results in a purchase, then every $8 you spend on that PPC campaign yields $100 in gross profits, $92 in net profits. That would be a very successful PPC campaign.

On the other hand, let’s say your CPC is $2, the service you sell is $10, and your conversion rate is only 10%. At these numbers, you would lose money, only making $10 for every $20 spent ($2 per click x 10 clicks for 1 conversion). With the same CPC, these two different ad campaigns have very different results.

Consider how much you’d like to make from an ad campaign and how often visitors to your site convert to determine what a decent CPC is for your specific business. Some companies can afford to pay more per click if it results in profitable conversions and a positive overall ROAS. If new customers have a potential lifetime value, factor that in as well.

How To Lower CPC

Your CPC can be lowered by improving the Quality Score of your ad. Quality score is based on a few different factors, including the ad’s click-through rate (CTR), relevance of keywords, and the overall quality of the ad and the landing page it leads to.

Test out different ad copy to improve the click-through rate and clicks in general on your ad.

Be sure to update keywords and include both the most relevant, highly searched keywords as well as lower search volume, long-tail variations.

Optimize landing pages for CRO (conversion rate optimization) and test out different copy, creative, and formatting to increase conversions.

Testing different ads can be vital to find the best combination of copy, images, format, and calls to action. Track ad performance using Google Analytics and stay up to date on what works and what doesn’t so that you make the most of your PPC ads, at the lowest possible CPC.

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