How to lower your Google Ads CPA to better scale your campaigns

Cost per action (CPA) – sometimes also referred to as cost per acquisition, is simply a form of measurement of how much your business pays to obtain an action taken, known as a conversion. We take a data-driven approach to marketing across everything that we do. When optimizing campaigns, we look to the data and analytics to make guided and informed decisions. It is a winning approach that delivers results.

On average, for every $1 spent on Google Advertising, it will get you a return of $2. If you are not, or even if you are, you are going to want to read on. In this article we will delve into the importance of CPA with Google Advertising campaigns as well as specifically, tried, and true strategies to significantly lower your CPA so you can boost your return on investment.

There are a tonne of guides, youtube videos, and blogs online on how to run Target CPA bidding for PPC and you can spend a few hundred hours of guesswork to translate those into actionable items. We take the guesswork out of the equation for you, and I am going to provide hands-on, proven strategies that we use ourselves that will help you to significantly lower your Google Ads CPA.

Understanding the CPA metric

So, what is CPA exactly? Google defines CPA as:

“The price advertisers pay for every new customer they acquire, which is calculated by dividing the total cost of conversions by the number of conversions. Google determines the CPA based on your quality score”.

Sounds pretty simple, hey? Until you throw Target CPA bidding into the mix, then things can appear to be quite complicated. Will get to that later in this article but for now will focus on how to measure and use this important metric.

CPA is an important benchmark that indicates the return of a campaign. The lower the metric, the better the return of your PPC investment. Lower cost per acquisition, means more leads and sales. It is that simple. Average CPAs however drastically vary per industry. For example, retail ecommerce CPAs can be around the $46 benchmark for search, while the average CPA for a legal firm is over $200.

Market cost per clicks play a large factor in this as well as the value of a conversion is much different. The lifetime value of a customer comes into play. It is important to understand this to keep matters realistic in attempting to reduce CPA, as unfortunately it is impossible to have every click turn into a paying customer.

So, what else determines your CPA? One thing that most Google Ads managers overlook when trying to lower CPA is in the second sentence of how Google describes CPA. What is that you ask? The answer is quality score. 

 

How Quality Score Affects CPA

It is common knowledge in Google Ads management that Quality Score affects your keywords cost per click, but not many realize that it is also an important factor in determining cost per acquisition. A higher quality score in your Google Ads campaigns will help to improve your conversions and lower your CPA. Optimizing for quality score and optimizing for CPA is essentially the same thing. The below shows how much you can save on CPA if your keyword quality score is higher than 5.

Impact of Quality Score on CPA

Quality Score Keyword Bidding Cost benefit %
10 Discounted by 80%
9 Discounted by 64%
8 Discounted by 48%
7 Discounted by 32%
6 Discounted by 16%
5 No benefit 0
4 Increased by 16%
3 Increased by 32%
2 Increased by 48%
1 Increased by 64%

 

The key takeaway here is if you have a below average quality score, this will also increase your CPA relative to your competitors, thus hurting your return on investment.

How To Lower Your CPA

Lowering your CPA will not be easy and will not happen with just a few small adjustments. It forms a part of a strategic approach using data analysis. Here are five proven strategies to help you drive your CPA down, improve your Quality Scores and help drive your return on ad spend (ROAS) up!

Review Location Targeting

A major thing that is overlooked is incorrectly using location targeting. It is a balance, going too narrow by postcode will generally result in higher CPM’s (cost per thousand impressions) with limited targeting options. But going too broad in targeting, it is also possible to be serving them to poorly converting regions. The rule of thumb here is to ensure that your location targeting matches your business service and product offering.  

For example, a local car washing service that services a town should not have state targeting as it does not match the business capacity and is just driving irrelevant traffic. By drilling down to locations that matter and are most profitable, you can save a fair amount of money. If you are getting limited traffic with larger location areas, you have got bigger problems with your account and campaign set up. Focusing on locations is a fast and efficient technique to reduce your campaign CPA and boost your return on investment.

Review Your Keywords

The foundation of most accounts starts with your keywords and there are several things you can do here to lower your CPA. The first and simple one is to press pause on the ones that are lower than 5.

Navigate to your campaign’s keywords, ensure that the Quality Score column is enabled and sort by score out of 10. Anything that is performing under 5, hit that pause button. That will stop your budget having the life sucked out of it by these underperforming keywords and will instead go to your higher performing ones. We recommend just pausing them rather than deleting them so that you retain the data in the account.

If you are using Enhanced CPC campaigns which is a non-automated bidding model, reduce your keyword bids. Data to take into context here when reducing your keyword bids is your current ad positions, your target ad spend and whether your campaign is showing it is limited by budget.

Another practice that we see when auditing most accounts is the lack of negative keywords used. Go to your campaigns keywords > search queries and then filter out irrelevant search queries by adding them as negative keywords. Use phrase match and exact match negative keywords so you are not being too restrictive on searches. Time and data is your friend here, you can use the Google Search Terms report to double check which searches are being triggered by your keyword match types. If you find search queries that are converting quite well, add these as exact match keywords.

Monitor Search Experience to Boost Quality Score and Utilize Clean Ad Structures.

We touched on how quality scores can improve your CPA, but how do you improve your keyword quality score? It all comes down to search relevancy which means this – Does the landing page match what the user is searching for?

Numerous times we come across ads just pointing to the homepage within our marketing audits. This may work for brand terms, but it does not help for product specific or service-based searches. Ensure that the landing page is quality and not a random blog post either. The idea is to think like you are your end customer and work backwards from there.

Another neglected practice that campaign managers can ignore is the importance of clean campaign ad structures. Make sure that your ad groups have relevant keywords and ensure that they are not stuffed with random variations. This will help boost your click through rate, which will also improve your quality score. Another method is to create an ad group structure known as ESKAGs (Exact Single Keyword Ad Groups); this is where advertisers focus on just one high performing keyword that is an exact match type per ad group. This can drive your budget behind the search terms that work, effectively lowering your CPA.

Use Google Ads IF Functions

A little overlooked Google Ads capability is to use the built in IF functions. IF functions allow advertisers to set up rules for them to ensure they only show based on desired conditions. For example, if you wanted to show a particular headline only on mobile devices you could write the below rule into the Google search ad description.

{=IF (device=mobile,Free Shipping): Buy Now}

By enforcing rules on an ad level may help to increase click through rates and improve keyword quality score, effectively reducing your CPA. And by also making more ads relevant and targeted to the end user you can avoid paying for irrelevant clicks, further reducing costs. To begin using IF functions in Google AdWords you need to decide what you would like optimized. Is it for the audience? The ad copy text, or is it the pricing? Ongoing ad and account optimization and testing is a sure way to find what works and to reduce costs in PPC.

Schedule your ads at the right time

Are your ads showing at the optimal time? Or are they showing and using budget in the early hours of the morning when you are not even open? Sounds pretty simple but it is often a setting that is overlooked! Ad scheduling allows advertisers to customize their ads by determining when it is the best time to display them in search results. As this data builds up, it also becomes a guide to mine to find out when it is the best time to bid on the hour and day. Just ensure that you test and monitor after making adjustments to your ad scheduling as your clicks and impressions will go down, which may negatively affect volume of conversions.

 

Use Machine Learning – What is Cost Per Acquisition Bidding?

CPA bidding or Target CPA is an automated bidding model offered in Google Ads which allows you to control your advertising spend. Instead of paying Google every time someone clicks on your ads like you do with CPC bidding, CPA requires you to only pay for each conversion. A metric that you can define yourself when you set up your campaigns. The conversion action could be a phone call, a sale, a lead, a content download, or checkout.

This allows you to optimize your advertising spend to just drive business and pay if the searcher engages with the ad and converts. It helps to eliminate irrelevant traffic. To get to this stage however, it does require a large amount of conversion data for it to work successfully and cannot be used straight away in a Google Ads account.

Get More, For Less

Lower the acquisition costs for leads and sales generated from Google Ads is achievable. It is just knowing what data can be leveraged, understanding the end user, and zeroing in on search intent. You can achieve some quick wins just by improving your ad targeting.

If you have a large CPA problem then try the more time-consuming tasks mentioned above by cleaning up your landing pages, ad account structure and optimizing to improve keyword quality score, testing out IF functions and refining down your ad scheduling. Once you have additional data, then try out machine learning and use target CPA bidding to leverage the artificial intelligence to make bids. The effectiveness of Target CPA bidding can vary depending on the industry and consumer, so check and monitor campaigns actively.

We also do not recommend mixing the above tactics all at the same time, gradual improvement and testing to see what works. Otherwise, you could sabotage your own results and you will not know exactly what is working. Time and effort are the key here to success. Getting more clicks, impressions, and conversions for less money with Google Ads is achievable. Putting these techniques mentioned above will help to lower your cost per action, we know this firsthand that they work because we do it on all the accounts that we manage. Have a look at some of our client results here:  

Need some further help with Google Ads? Got further PPC questions? Claim you free audit and plan today!