What is CPC?

Cost per click also abbreviated to CPC is an online advertising term that websites use to bill advertisers. CPC is the price you pay for each click. In this article you will discover

What is CPC

Why CPC is an important metric to PPC campaigns

What defines a good CPC

How you can go about lowering your CPC 

Understanding CPC

Pay per click campaigns are most commonly run-on digital advertising platforms such as Google Ads (previously known as Google AdWords), Facebook, Amazon, and Bing Ads. It is important to keep in mind that CPC is the price you pay to get a potential customer to visit your website, it is not the cost to get a customer to act or “convert”. This is known as cost per acquisition/action (CPA).

How is CPC determined?

Your cost per click is influenced and determined by several factors. It can also vary depending on the advertising platform, as an example we will focus on Google Ads as it is the most popular PPC advertising platform worldwide. These include but are not limited to your set maximum bid, your keyword quality score and the ad rank of the other advertisers that are bidding on the same keyword.

To break the formula down, it looks something like this:

Competitor Ad Rank / Quality Score + .01 – Actual CPC

It may appear complicated but to break it down simply because of how the ad auction works, it is only influenced by the following things:

  •       Your ad rank: where your ad sits in the ad auction process against your competitors.
  •       Quality Score: Google’s rating system that ranges from 1 to 10. It factors in your landing page experience, relevance to search terms, quality of the ad as well as the historical click through rate of the advertisement.
  •       Maximum Bid: the maximum amount you are willing to spend. At the end of the day, your CPC will always be the same or less than your maximum bid.

Keeping these factors in mind, it is those three metrics that influence the price of cost per clicks against the market rate. The things that you have control over to influence the price is the maximum price you want to pay; how relevant your website is in relation to the keyword and the quality and click through rate of your advertisement.

Why is CPC an important metric?

Measuring CPC is important for the following reasons.

  •       It acts as a benchmark that you can use to track to see how much you should be bidding on a keyword.
  •       It’s used as a key metric of measurement so you can get the best out of your campaigns.

What is a Good CPC in Google Ads (Google AdWords)?

It really depends on the industry and understanding the benchmark for your industry. By knowing the benchmark for your industry terms, you can ensure that you are not over or under spending on your PPC campaigns.

According to Wordstream, the average cost per click across all industries is $2.32 for search and $0.58 for display campaigns. This can vary and fluctuate depending on the industry and how competitive it is, for example an ecommerce store may see an average of 88c while a legal service may get up to the $20 mark. It depends on a number of variables.

Also, if you’re striving for a lower CPC it should not be the end all to measure the success of a keyword. Some higher CPC keywords could drive a better result as they deliver a better return on investment as they drive better value based on intent.

It’s all very relative and depends on your business, product or service, location and customer base. At the end of the day, if you are making profit from each conversion against your ad spend, then a high cost per click does not hold a high importance. A good CPC is all completely relative. 

How do I lower my CPC?

If you want to lower the cost per click of your keywords, you must first rephrase the question of how do I lower my overall cost per click, with how do I improve my keywords quality scores. By focusing on your quality scores you can drastically lower your CPC.

Ways to improve your quality score

  •       Keyword Relevance: Is your ad text relevant to the keywords that you are bidding on? It is important to keep in mind that you need to be exactly what the person is looking for in search. By having clear headlines and ad text it will result in higher click through rates which will deliver higher quality scores.
  •       Landing page quality: Does the landing page match what the end user is searching for? Is it impactful and does it get them to drive action? Does it also load quickly? Your landing pages must be of high quality, poor loading pages result in poor quality scores.
  •       Increase your click through rate: The click through rate is a measurement of how often your ad is clicked on in search results. The more relevant and compelling it is to the search query, the more likely it will get clicked on.

Conclusion

CPC is an important metric, but it is not a metric to get too hung up on. It forms part of a bigger picture which is to drive customers to your site to take action and CPA (Cost Per Acquisition) is more important in the long run. By utilizing the tips and tricks above, it should help to find those profitable keywords as well as to significantly lower your PPC costs to help drive traffic to your website.

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