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What is Cost Per Click and how can you use it to grow your business?

Author: Salt Rank
by Salt Rank
Posted: Sep 14, 2019

Cost per click (CPC) refers to the actual price you pay for each click in your pay-per-click (PPC) marketing campaigns. If you want to run any type of online advertising campaign, you must understand how CPC works and how you can use PPC advertising to your best advantage. Below we will go into greater detail about CPC, as well as helping you to lower your cost per click while maintaining (or even improving) your traffic and conversion levels.

A "click" on one of your PPC text ads or display banner ads represents a visit from a potential customer, or an interaction with your company’s product or service. Every click in a PPC campaign represents attention from a person who is searching for something that you offer. In a PPC campaign, this attention from potential customers is what you are buying. As an advertiser, it is important to note two factors.

  1. What type of attention you are going after.
  2. How much you are paying for it.

How is Cost Per Click Calculated?

The actual formula for cost per click in AdWords is:

Competitor AdRank +.01 = Actual CPC

Your Quality Score

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 some time. Because of how Google's Adwords auction works, your actual cost per click is heavily influenced by both you and your closest competitor’s ad rank, maximum bid and quality score.

  • Maximum bid - A maximum bid is the absolute most you are willing to pay for each click on your ad when it appears in response to a keyword or groups of keywords on the SERP.
  • Quality score – Quality score is the other important factor in determining your ad placement. Google uses the Quality Score system to reward advertisers who create more relevant ads that are more valuable to users. It takes into account a combination of keyword relevance, ad text relevance, landing page relevance and click-through rate (how often people click on your ads).

What is the Average Cost Per Click in AdWords?

Average CPC varies widely by industry and business type, but the average across all industries is about $2 per click. Look into finding the average for your specific industry/business type to ensure that you aren’t paying too much.

Why is Cost Per Click important in Search Advertising?Cost per click is important because it is the number that is going to determine the financial success of your paid search campaigns. Your return on investment, whether you are over or underpaying for each action, will be determined by how much you are paying for clicks and by what kind of quality you are getting for that investment.

Since the overall ROI of your campaign is determined by how much you are paying for clicks, and the quality of traffic they’re bringing in, it is important to think about the cost per click in terms of both cost and value. You want to identify and target clicks that are both inexpensive and valuable.

How do you Lower your CPC While Maintaining Value?

Three key paths of action need to be taken to ensure that you are getting the best value for your money.

  1. 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 is 5) are given a discount from anywhere between 16-50%. However, accounts with a 4 or lower quality score see a 25-400% increase in their CPC. So take advantage of those discounts by raising your quality score. Increase your click-through rates by creating compelling and relevant ads. Build out closely related ad groups. Optimize your ad text and landing pages so that they speak to individual search intent.
  2. Expand Your Reach. By discovering new, relevant and valuable clicks, the distribution of your budget will be improved substantially. To do this, constantly be looking for new PPC keywords and search advertising opportunities.
  3. Refine Your Reach. You can’t just continually expand your PPC keyword list. You must also be looking to eliminate keywords that are not performing well. So, as you add new keywords to your AdWords account, be sure to eliminate the losers. Target only keywords that perform well and are relevant to your business. This ensures that your advertising budget is protected. Paying a low CPC isn’t helpful if all you are getting is irrelevant clicks. Ensuring your keywords are relevant and refined also helps to improve your quality score, lowering your CPC and raising your ad rank.

One of the best ways to ensure that you are getting the best return on your investment is to hire professionals. Find a local advertising agency to help you navigate this with success and you will be well on your way.

About the Author

Salt Rank is a result oriented full service digital marketing agency. We are a one stop shop for all your web needs specializing in SEO, PPC website design, web development and app development.

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Author: Salt Rank

Salt Rank

Member since: Jul 18, 2015
Published articles: 17

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