What is a Cost Per Click –

The Cost Per Click (CPC) is the value an advertiser will pay each time a user clicks on the advertisement. This type of billing is prevalent when it comes to acquiring traffic on paid channels. The advertiser will thus produce a royalty only if the Internet user clicks on his advertisement and not on impressions (= number of displays of the ad).

To be more precise, there are three types of CPC:

  • Max CPC: this is the maximum amount an advertiser is willing to spend on a keyword. It is the advertiser who sets this amount in their Google Ads account.
  • The average CPC: fluctuates according to the bids and the prices. It is a good performance indicator since it averages the cost of clicks which are constantly fluctuating. The lower it is, the more clicks you can get on a budget.
  • The actual CPC: this is what we are talking about when we talk about the CPC. It is the final cost per click defined by Google, which considers the advertiser’s ranking and the max CPC.

How is the actual CPC determined?

What is a Cost Per Click-

The Cost Per Click is a variable determined based on trends and the use of keywords desired. This CPC also depends on the ” ad rank ” of the advertiser, i.e., its ranking compared to others.

Google sets up this ranking according to the ” quality score ” of the advertiser and the maximum cost per click that he is willing to pay.

Believing that the one with the most significant budget on Google Ads will obtain a lower cost per click is a mistake since this CPC also depends on the ” quality score, “established according to the expected click-through rate, the relevance of the keywords, the quality of the ad as well as the excellence of the landing page. An advertiser ready to put a max CPC higher than yours will not necessarily be better than you in the ranking. Everything depends on the quality score, which is not to neglect when you start your campaigns.

How is the average CPC determined on Google Ads?

As we said before, CPC also depends on an auction system. As with traditional auctions, the higher the demand, the higher the price will be. It works the same with cost per click: the average cost per click will increase if a keyword or query has a very high volume. It is why a keyword with competition and a relatively high overall volume will have a cost per click much higher than a keyword little used by competitors. This model follows the logic of so-called traditional advertising: distributing advertising on a national medium will cost much more than displaying it with a local audience.

How to reduce your average Cost Per Click?\

What is a Cost Per Click-

Reducing the average cost per click starts with choosing low-volume keywords. If you are working in a position market, then you will not have too many problems. On the other hand, if you sell more common products or services, you will have to find some tips to reduce these costs with more specific keywords or long tail.

Focus on the Ad rank

As mention at the foundation of this article, the Ad rank set up by Google will determine the average CPC.

This Ad rank depends on the maximum bid you are willing to place and the quality score. This quality score is a note out of 10 that Google assigns to you and which will directly influence the cost per click that you will pay.

What is a Cost Per Click-

It then depends on:

  • click-through rate: according to estimates, it represents 60% of the quality score. CTR is the number of clicks separated by the total number of impressions. We can still remind you that the CTR depends on each keyword and its level of competition.
  • The relevance of the ad: the message of your ad must perfectly match your keywords. The letter should not be too specific, nor too broad, to answer the user’s request.
  • Of the landing page: the page on which the user will arrive after clicking on your ad is an essential factor if we want a good quality score. We must therefore ask the right questions: Is the displayed content what expect? Does the user feel safe on our site? Are our pages loading fast? Also, think about mobile navigation, which must optimize to encourage visitors to visit other pages.

Individual keywords only make up a tiny fraction of web traffic. Using long-tail keywords (more than 3.4 words) will capture most of the traffic sought. These queries often correspond to fairly specific searches, and it will usually be less costly for you to use them. But for this, you need to know of it through SEA tools. The challenge is to place long-tail queries, often less expensive than keywords with a high volume but can generate good traffic and qualitative leads/customers.

How much budget to allocate to an Adwords campaign?

The budget for a Google Ads campaign is prepared exactly like the budget for a project; it is an investment. This budget may therefore be subject to modifications, whether upward or downward.

The Google Ads platform allows you to monitor each campaign with a dashboard and statistics on critical data to manage your account. Each movement can therefore be controlled individually, depending on the results.

A quantified example

It is also interesting for you to measure the cost of an Adwords campaign: imagine an ad through an Average Cost Per Click of € 0.4, and you need around 250 clicks to obtain five leads (i.e., a conversion rate of 5%).

The budget will therefore be 0.4 x 250 = 100 € for your campaign. By dividing the number of actual clicks by the number of impressions (statistic given on the Adwords interface), you will obtain your Click-Through Rate (CTR), which should seek to increase permanently. Remember that this CTR will improve your quality score (and, therefore, the cost of your ads).

Acquisition costs

The most critical data among these numbers will be the Cost of Acquiring a Customer (CAC). To calculate it, you divide your investment by the number of leads signed. And if you want to know your Cost Per Lead (CPL), the calculation is the same, but with the number of conversions this time. If you have an exact knowledge of your costs and the margin you are getting on your products or services, you can know if your CAC is higher than what you should have for your Google Ads campaigns.

Conclusion

The allocation of a budget for an Adwords campaign will again depend on the products you sell and the keywords selected. Average Cost Per Click depends on your competition, even if it estimates between 1 and 2 euros on average.

You can then adjust it by using more or less competitive keywords, but know that it is a job to be done regularly and evolves just as quickly. For this reason, despite the ease of use and the speed to put campaigns online alone, it is sometimes essential to call on a Google Ads agency.