CPC Formula
There are a number of ways to calculate your CPC, but the most common is to divide your total cost by the number of clicks you've received. This will give you an average CPC for your entire campaign.
You can also calculate CPC for individual keywords or ads, which can be helpful in fine-tuning your campaign. By tracking your CPC, you can adjust your budget and bids to ensure that you're getting the most out of your PPC campaigns.
However, if you’re new to marketing then you might be wondering exactly what cost per click even means. How can you use CPC data to improve your advertising campaigns?
In this comprehensive guide, we'll explain what CPC is and how to use it to your advantage. Then, we’ll provide you with some tools to help ensure you’re optimizing your campaigns properly to see the best results.
What Is Cost Per Click?
Cost per click is an advertising metric that can help marketers and businesses calculate the cost of each individual click on an ad. You might see cost per click abbreviated as CPC, but it’s the same thing however it’s written.
And, yes, it’s really only relevant to paid ads on platforms such as Google and Facebook. How do you calculate cost per click?
We’ll get into that in a bit, but here is a basic breakdown. CPC is calculated by dividing the total cost of an advertising campaign by the number of clicks received.
For example, if a company spends $100 on an advertising campaign that generates 1,000 clicks, their CPC would be $0.10.
You might be thinking, “Well if I know how much I’m spending then what does that cost per click matter?” Cost per click is a useful metric for advertisers because it allows you to track how much you’re spending on each click.
Once you know how much you’re spending, you can work to improve your campaigns. The goal is always to reduce the cost per click in order to increase the return on investment (ROI).
For example, if you notice that your clickthrough rate is high but your cost per click is also high, you can use that data to optimize your campaigns. In this case, you might want to bid on different keywords to compete for less expensive ones.
In short, cost per click is a helpful metric for understanding the effectiveness of an advertising campaign and making strategic decisions about where to allocate resources.
Why Is Cost Per Click Important in Marketing?
It goes without saying that CPC is an important metric in paid ads marketing. It represents how much it costs to get a single person to click on an ad. That might not sound like much, but when you're trying to reach a large audience, those clicks can add up quickly.
It’s also an important metric as it allows marketers to measure and compare the cost of different marketing campaigns.
For example, if two campaigns have the same keywords but different ad copy then you can use CPC to determine which ad copy is the most effective in generating clicks. The version with the lower cost per click is the one you’d want to focus your attention on.
Ultimately, CPC isn’t the only metric you should be tracking when running paid ads, but it’s a great place to start in determining where to allocate your budget and what to optimize.
CPC Calculation: How to Calculate Cost Per Click
Back to the question posed at the beginning of this guide. How do you calculate cost per click?
CPC is calculated by dividing the total cost of a campaign by the number of clicks generated.
For example, if a campaign costs $100 and generates 10 clicks, the CPC would be $10.
What do you do with that calculation, though? If your CPC is low, then it means that your ad is performing well and generating a lot of clicks for a relatively low cost.
On the other hand, if your CPC is high, then it means that your ad is not performing as well and needs to be improved. How do you know what “high” and “low” refer to in this context, though? Great question!
What Is a Good Cost Per Click?
Obviously, you want to keep your CPC as low as possible in order to maximize your return on investment. But how low is too low?
Unfortunately, there is no straightforward answer to this question. CPC varies greatly depending on the industry and even the individual campaign.
For example, CPCs in the legal sector are generally quite high, while CPCs for general consumer goods are usually much lower. In general, however, most advertisers aim for a CPC of between $0.50 and $2.00.
We can break that down by platform and ad type, though.
If you’re running search ads on Google, the average CPC across all industries is about $1 to $2.
Alternatively, the average CPC for Facebook ads is only about $0.50 in the US. That average goes up slightly when compared across all industries on a global scale, however.
By understanding what a good CPC is for your industry and your individual campaigns, you can better optimize your ad spend and get the most bang for your buck.
What Factors Influence CPC?
Because CPC is a measure of how much it costs to get a potential customer to click on an ad, results can vary depending on a number of factors.
For example, CPC rates tend to be higher in industries with more competition, as businesses are willing to pay more to get their ads seen by potential customers. You’ll find that industries with common, competitive keywords have the highest cost per click.
Typically, this applies to legal and financial industries. If you’re running campaigns for insurance, mortgages, financial loans, credit cards, credit repair, or attorneys, you’ll notice high CPCs across your campaigns.
CPC rates can also be influenced by the time of day. This is because people are more likely to click on ads when they're actively using the internet (during work hours) than when they're not (late at night or on weekends).
Finally, CPC rates can be affected by the country or region in which you’re running the ads. In general, CPC rates are higher in developed countries like the United States and Canada than they are in developing countries like India and Indonesia.
How to Reduce Your CPC
The goal of most online ad campaigns? A high conversion rate, a low cost per engagement, and a low cost per click. Attaching each of those issues is key to seeing high rates of overall success.
However, let’s start by simply talking about how to reduce your CPC.
Choose the Right Keywords
If you want to improve your CPC, you need to choose the right keywords. Keywords are the foundation of any good pay-per-click campaign, and they can make or break your chances of success.
The first step is to identify your target audience. What words are they likely to use when searching for products or services like yours? Once you've got a good list of potential keywords, it's time to start testing them out.
Try running a few PPC campaigns with different keywords and see which ones perform the best. With a little trial and error, you'll be able to find the perfect keywords for your business.
Always look for less competitive keywords that have high relevance to your product or service. When in doubt, it’s best to opt for keywords with lower search volumes but that are less competitive.
When you use that keyword strategy, you’re able to increase the likelihood of, let’s say, 50 people clicking on your ad for a super low CPC versus having only three people click the ad for a high CPC.
Write Great Ad Copy
Want to lower your CPC? Focus on optimizing your ad copy! How? Firstly, it’s important to use persuasive language that will encourage people to click on the ad.
Be sure to weave in the right keywords we mentioned above in a way that sounds natural yet relevant. Talk about the benefits and your core offer, making both as clear as possible for any reader to scan in five seconds or less.
Finally, it's also important to make sure that the ad is relevant to the target audience. Do they actually want what you’re offering? If not, how can you make that offer more attractive?
Use Effective Bid Management
Effectively managing bids can help to improve your CPC rate, allowing you to get more clicks for your advertising budget. There are a few key things to keep in mind when managing bids.
First, consider what you want to achieve with your ad campaign. Are you looking to increase brand awareness, generate leads, or drive sales? Your goals will dictate how you manage your bids.
Second, keep an eye on your competition. If they are bidding higher than you, it may be worth raising your own bids to stay competitive. On the other hand, if they bid too low, you may be able to lower your bids and still maintain a good position.
Finally, don't be afraid to experiment. Try different bid strategies and see what works best for your business. And remember, even if one approach doesn't work out, that doesn't mean it's not worth trying again in the future.
Target the Right Audience
In order to improve your CPC, it is essential that you target the right audience. This means finding a balance between interest and intent.
The first step is to determine who your target audience is. Once you know who you’re targeting, you can then begin to create content that resonates with them.
For example, if you find that your target audience is professionals interested in learning about Excel, you are probably going to create ads with a bit more of a professional tone than a wacky, witty tone.
Aside from simply writing copy that resonates with them, think about where your target audience spends their time online. If they are active on social media, for example, you will want to make sure that your content is being shared on those platforms.
By targeting the right audience, you can significantly improve your CPC and reach your desired goals.
Optimize Your Website for Conversions
Any business that has a website should be focused on improving its website's conversion rate.
To do this, make sure your website is mobile-friendly. More and more people are accessing the internet via their smartphones, and if your website isn't mobile-friendly, you're losing out on potential customers.
Also, be sure to use strong calls to action. Your call to action should be clear and concise, and it should tell the reader exactly what you want them to do.
Don’t be afraid to rely on data either. In fact, we encourage it! You have CPC data along with conversion rate data and cost per engagement data. Use those to get an overview of your campaign performance.
Make sure you're constantly testing different landing pages, ad copy, and keywords to improve CPC so that you can get the most bang for your buck.
Add Negative Keywords
Finally, one (last) great way to improve your CPC is to add negative keywords to your campaign. Negative keywords are words or phrases that you don't want your ad to show up for.
For example, if you sell women's shoes, you might want to add "men" as a negative keyword so your ad doesn't show up when someone searches for "men's shoes." You can add negative keywords at the campaign or ad group level.
To find out which words you should add as negative keywords, you can use the "Keyword Planner" tool in Google Ads. Just enter some of your main keywords and it will show you a list of related terms, some of which might be good negative keywords for your campaign.
Look at Your Conversions
Cost per click allows you to compare the cost of your advertising campaign with the results you're getting. If you're spending a lot of money on ads but not seeing a lot of results, then you'll need to reevaluate your strategy.
However, what you ultimately want to aim for and measure are conversions. After all, driving traffic to your website is great, but if it’s not resulting in conversions then you’ll still find that you’re falling a bit short.
Want to calculate your conversions? We’ve got just the tool for you. Our conversion rate calculator allows you to measure the percentage of visitors to your website who have taken some sort of action.
Use our conversion rate calculator now to measure your results.