Why cost per click (CPC) doesn’t matter, yes, I have said it! I know this will ruffle a number of feathers I am sure.
CPC the holy grail?
So many clients that I run advertising campaigns for on Google, Facebook, LinkedIn and Twitter amongst others are obsessed with their Cost Per Click (CPC).
“We cannot afford that keyword” or “we cannot afford that Facebook campaign”
Yes, true a high CPC can drain your budget fast but if you are making money on those clicks then why would you stop the keyword or advert?
Whilst CPC is important to monitor there are many many more important things that you should be turning your attention to when analysing your campaigns. Remember why Cost Per Click (CPC) doesn’t matter!
Cost Per Acquisition Is THE Metric That Matters – Why Cost Per Click (CPC) Doesn’t Matter
You see Google, BING, Facebook etc are keen to bombard you with so many different metrics. Clicks, Impressions, CPC, Reach to name a few but Cost Per Acquisition (CPA) is so often overlooked.
One of the reasons why CPA is often overlooked is that in many cases it does involve some expertise to setup. Looking at Facebook as example we need to pass the cart (purchased) value over to the purchase event to calculate our CPA and our Return On Advertising Spend (ROAS).
Platforms such as Shopify, Wordpress (WooCommerce) and Magento (there are others) will often have plugins that will do this for you.
Cost Per Acquisition Example
I mentored a client a while ago who obsessed with CPC. The average CPC for the campaign was £1.26 and the client wasn’t happy that his friend down the road was paying £0.35 per click.
They were obsessive about this even to the point that they wanted to turn off the campaign. Now their friend down the road was in a completely different industry and didn’t have a huge amount of competition for their keywords. My client was different in that competition was high.
Now the costs of the products sold by this client was in the range from £399 to £2,500 and the CPA was around £17.35 per purchase meaning they had a Return On Advertising Spend (ROAS) of 21.75.
For this particular client so long as the CPA was below £100 they were profitable.
In this case sweating over the CPC figure and potentially stopping campaigns was a big no no. I told them to increase the spend significantly!
CPC is still Important
Whilst the above is a clear example of why you shouldn’t always sweat over CPC. Still it is an important metric.
Consider these scenarios…
One business has a CPC of £45.60 and they sell products at £5,000 a go.
Yes £45.60 is an eyewatering CPC and costs can reach these levels for very competitive keywords at times but at the cost of a product will offset this if you are converting those clicks.
The average Click Through Rate (CTR) is 3.52% on the search network according to Wordstream
So, if you get 1,000 impressions of your advert on Google search that would potentially lead to 35 clicks on your advert. At a cost of £45.60 per click this would cost £1,596
The Conversion Rate
Yes, the conversion rate, the vitally important part! For this client’s industry (Industrial) the average conversion rate according to Wordstream is 3.71% on the search network.
With 35 visitors to the website we would expect at least one person to convert. That conversion is worth £5,000 so from a spend of £1,596 this is great profit.
Consider a company in the same industry competing against similar keywords whose product sold at £1,500 a go. Using the same figures, a CPC of £45.60 would not be profitable.
The Landing Page – Conversions – The Final Peace Of The Jigsaw
Your landing page from your advert really does matter. I see so many people sending paid traffic to their website’s homepage or to a page that just isn’t setup for conversions. No PPC or advertising campaign is complete without a conversion busting landing page.
This effects your bottom line and often pushes that Cost Per Acquisition way above the level for profitability.
Your landing page is most probably part of a bigger Sales Funnel that you have setup and it is important to make sure that all parts of this funnel is profitable.
Cost Per Click Conclusion
If your landing page is not working and not converting, then CPC is the least of you concerns!
If it is and it is profitable don’t panic over CPC. This can be lowered over time it is the CPA that is the key. If this is positive, then you can scale to become more profitable.
Fret over the CPA not the CPC!