In Digital Marketing there are tons of acronyms, especially three-letter acronyms; CPC, CPL, PPC, CTR, CTA, ROI, MER, CPM… but what on earth do they mean?
They are all highly helpful, but some will be more crucial than others based on the campaign’s objectives.
However, there is one aspect of pay-per-click marketing that, regardless of goal, should never be disregarded. One who occasionally appears untouchable, dishonest, or downright enigmatic.
And that is, of course, CPC!
The real cost per click in your marketing initiatives is referred to as “CPC.” This determines how much you pay for that encounter and, consequently, what result you want. The virtual action a user takes to enter your online store or office is called a “click.” It brings someone who is looking for something you have into your world.
That being said, CPC on its own isn’t the full story.
The cost of your ads and conversions are also influenced by other elements including the effectiveness of your landing pages and their conversion rates. CPC, however, is a crucial component that, due to its occasionally complexity and misunderstood nature, might be simply tolerated or, worst, forgotten.
You’re still unsure of what it is. If you’re a fan of Star Wars, CPC may be compared to “the force,” which is something that surrounds us as digital marketers. Some learn to control it and develop into formidable Jedis, while others are more like Jar Jar Binks.
Everyone avoids aspiring to be the Jar Jar of marketing (Google it).
Why is CPC important?
CPC is the foundation of PPC, and it’s one of the key determinants of your marketing campaign’s cost (repeat that ten times after a social). It stands for the personal investment you are putting in interacting with that person.
Let’s say that your PPC advertising acquire 1000 clicks apiece from you and one of your rivals. No big deal, right? They pay 50p every click, and you pay £1. Only 50 pence! Wrong! You are shelling out a total of £500 more than they are, assuming all other factors stay the same. Now listening?
How is it calculated?
CPC is calculated using one formula. However, the makeup of the components in that formula are calculated from other formulas, so to truly understand how CPC is calculated, you will need these three formulas:
- Cost Per Click (CPC) = (Ad Rank of the competitor below you / your Quality Score ) + £0.01p
- Ad Rank = Max CPC Bid x Quality Score
- Quality Score = Combination of Ad Relevance, Expected CTR and Landing Page Experience (exact weighting is unknown).
Sounds complicated right? We could spend agessss breaking this down, but we’ll stick to the key takeaways.
CPC is determined by the amount you’re willing to pay (Max Bid), how relevant your ad is (Quality Score), and your performance relative to competitors (Ad Rank positioning).
What affects the CPC?
Some are internal, which you have complete control over, while others are external, which simply means that their CPC will be greater than others’ (you can still influence how much higher).
It’s not exactly as black and white as you might anticipate. There are numerous crossovers, and they all have an impact. What I would consider the key elements are listed below:
When it comes to CPC, different sectors use different criteria. For instance, the typical CPC for legal services on Google Search in the US is $5.88. Even the most talented marketing Jedi would not be able to reduce the CPC for his legal client’s client to that of the typical eCommerce business, which has a CPC of $0.88. It makes natural that the CPC will increase as the value of the good or service increases. This element of the equation has an impact on the bid cap.
When it comes to CPC, the fundamental economic tenet of supply and demand holds true. You will pay more for that click if more businesses are bidding on that particular search keyword. With the use of programs like SEMrush or Google Keyword Planner, you can determine how competitive a search term is. In contrast to Keyword Planner, SEMrush evaluates the level of competition as either “high,” “medium,” or “low.” This variable has an impact on the equation’s bid cap and ad rank position components.
This warrants a whole separate blog, so I’ll only touch on it briefly.
Quality Score is a score that Google (other PPC engines have similar quality incentives) gives your ad based upon its perceived quality compared to your competitors. It is rated from 1 to 10 and is itself a great diagnostic tool.
“Thanks, Pete, but what does this have to do with CPC?” You might be asking.
From Google’s point of view, you should consider that they want people to use their search engine, therefore they want to make sure that consumers can get relevant and high-quality material in both their search results and PPC advertisements. Google encourages advertisers to target the appropriate keywords and produce pertinent advertising by directly linking it to the price they pay in order to accomplish this (CPC). Your CPC will be higher the lower the quality score. The average QS on Google is 5, however anything under 6 results in a percentage increase in CPC, and the increase increases as the QS decreases. For example, QS of 3 can see up to a 67% increase in CPC with QS 1 resulting in up to 400%!! Conversely, a QS of 10 can result in a decrease in CPC by up to 50%.
Quality score is calculated using three main variables; firstly, Ad Relevance, secondly, Expected CTR and finally, Landing Page Experience.
Seasonality and geographic location both play huge parts in your CPC, this is closely linked to competition.
For instance, around Christmas, competitors may increase their spending or new competitors may enter the PPC market to profit; as a result, Max Bid increases. Similar to this, your CPC will be higher if you are headquartered in a highly lucrative area, like London, where there is more competition.
Keyword purpose and specificity are additional (and sometimes disregarded) variables. Because the user is further away from making a purchase and is less likely to convert, keywords that signal information hunting as opposed to transactional intent are less competitive. Again, staying with the subject of competition, niche keywords draw less competition and, if they are niche to you, frequently produce higher Quality Scores.
You have it now! Not quite as enigmatic now.
As you can see, CPC is a crucial measure to comprehend and control. There are numerous factors that can affect it, but there are also numerous factors that you, as marketers, can influence. Keep the CPC in mind, choose your keywords wisely, pay attention to your Quality Score, and, most importantly, don’t accept it when building or optimizing your next PPC campaign.