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What Is Cost Per Click (CPC)? 9 Tried and Tested Ways to Optimize Your Advertising Campaigns

My Post (30).pngIf you are just getting started with PPC (Pay Per Click), there are a lot of things that you need to understand to run your paid campaigns effectively. One of these is CPC (Cost Per Click).

While CPC appears to be the price that you pay for each click that your ad receives, it is much more than that. CPC is one of the most important metrics that you should be measuring and optimizing to ensure a good return on investment. The CPC that you pay plays a huge part in your campaign’s profitability. In this guide, we will look at the proven methods of bringing down your CPC:

  • What is Cost Per Click (CPC?)
  • How is Cost Per Click Calculated and How Does it Work?
  • What is the Cost Per Click for a Keyword and How Can You Find This Out?
  • The Phasing Out of Cost Per Click in Google and Bing Ads
  • 9 Tried and Tested Ways to Improve the CPC for Your Ads

What is Cost Per Click (CPC?)

Every time someone clicks on one of your PPC (Pay Per Click) ads, you are charged for the click. However, you can set the maximum price that you are willing to pay at the keyword level. This means you can bid higher or lower depending on the intent of the keyword and its value to your business.

The CPC is the actual price that you pay for these clicks based on the keywords that you are bidding on. How much you pay for clicks impacts a number of different areas of your campaign’s performance, including:

  • How many clicks you receive for a set budget.
  • How visible your ad is and how frequently it is shown.
  • The ROAS (return on ad spend) of a campaign and its profitability.

Running a successful campaign is all about driving the highest ROI without missing out on opportunities for sales or leads. Set your bids too low and your ads aren’t shown frequently enough or they aren’t driving conversions. Set your bids too high and you will impact the profitability of your campaign.

How is Cost Per Click Calculated and How Does it Work?

One thing that is important to note is that the max cost per click that you set for a keyword isn’t the same as the final price that you pay. In fact, you only pay the minimum amount to clear the Ad Rank thresholds and beat the Ad Rank of the competitor immediately below you.

But let’s clear up some confusion. Max CPC and Average CPC aren’t the same as the Actual CPC you pay.

Max CPC = The maximum price that you are willing to pay per click, set in your ads account.
Average CPC = The total cost of all of your clicks divided by the total number of clicks. 
Actual CPC = The actual price you pay for a click.

Here is how your actual CPC is calculated:

Competitor Ad Rank / Your Quality Score + 0.1 = Actual CPC
There are many other factors that influence your actual CPC, too. And in this guide, we will go over how you can work to reduce your cost per click and optimize your ads.

What is the Cost Per Click for a Keyword and How Can You Find This Out?

When you are in the process of building out a PPC campaign, you want to be able to set your daily (or monthly) budgets and estimate how much your CPC will be across the keywords you are going to bid on.

You can find this insight by using the SEMrush Keyword Magic tool. Enter your desired keyword and you will be presented with your keyword and a list of related keyword variations. You can also see the average CPC that advertisers pay when a user clicks on their ad.

In this example, we are looking at how much it will cost for a click on an exact match keyword of [LA Lakers Jersey].

SEMrush Keyword Magic tool

We can see that the average cost per click on this exact match keyword is $0.43.

Another alternative is to use the CPC Map to gain a location-based or industry-specific average as to how much the average PPC click costs. This can be useful when trying to determine an approach to geo-targeting that could help you improve your campaign’s ROAS.

The Phasing Out of Cost Per Click in Google and Bing Ads

Historically, advertisers have had full control over the maximum CPC that they pay for ads and most campaigns were set up using a ‘manual CPC’ bidding strategy. However, PPC is no longer based solely on either a CPC or CPM (cost per thousand impressions) model.

We now see many types of different bidding strategies. These are just some of the more common ones, to name a few:

  • Manual CPC (manually setting maximum click costs)
  • Target CPA (bidding based on a target cost-per-acquisition)
  • Enhanced CPC (using smart bidding, Google will decrease or increase your bid based on conversion potential)
  • Target ROAS (bidding based on a target return on ad spend)
  • Maximize Conversion (bidding set to maximize the number of conversions for a budget)
  • Maximize Clicks (bidding set to maximize the number of clicks for a budget)
  • CPM Bidding (paying per thousand impressions)

You can learn more about the different bidding strategies here. It is important to know that you are no longer tied to only manual bidding and that there are a number of alternatives to help you to optimize your campaign costs. – Read more