Cost Per Click: How It Works And Why It Matters

February 9, 2024 | PPC

Advertisers have paid for publishing ads in the media for ages. The same applies to digital advertising as well.

But the best part of online advertising is the advertiser only needs to pay the publisher if a particular goal is achieved.

And there comes cost per click (CPC) into the picture.

So, you guessed it right. Today’s topic would be about CPC, how it works, the formula for calculating CPC, the method of calculating CPC for keywords, and how to lower the cost of your CPC campaigns.

But first thing first!

What Is CPC?

What Is CPC?

Cost Per Click (CPC) is an online advertising metric that describes the amount an advertiser pays to the publisher for each click on the published ad.

How Does CPC Work?

Cost per click is one of the most popular advertising revenues that fall under the pay-per-click (PPC) model.

Google, Amazon, and Facebook are examples of the most popular platforms that offer CPC marketing.

You need to find keywords relevant to your business and bid for them.

Sponsored results in Google SERP

After successfully completing the bidding process, your ad gets displayed on the publisher’s platform (search results pages) when someone searches for those keywords, as shown above.

You need not pay anything to Google up to this point. You need to pay Google when someone clicks on your ad and lands on your page. 

You must choose the most relevant keywords, write engaging ad copies, and design attractive landing pages with clear CTAs (Call-To-Action) to gain the maximum benefit from your CPC advertising.

However, let’s see how you can calculate CPC for your advertising campaign.

How To Calculate CPC?

The CPC formula typically looks like this:

CPC formula

If you divide the total advertising cost by the total number of clicks your ad received, you will get the cost per click for your ad.

For example, if your total advertising cost is $200 and your ad received 1000 clicks, 

Your CPC = $200/1000 = 20 cents

How To Find Cost Per Click Of Your Targeted Keywords?

The first step of a CPC marketing campaign is to find the most relevant keywords for your product or service.

Next, you need to find the average cost-per-click for the keywords you want to target through your CPC marketing.

In this section, we will discuss the two most effective tools you can use to find your keywords’ CPC.

RankWatch

RankWatch offers the best free keyword research tool to make this task a breeze without extending your advertising budget.

RankWatch keyword research tool

The tool will suggest a list of organic and long-tail keywords related to your seed keyword in the blink of an eye.

Keyword suggestions in RankWatch keyword research tool

The tool also provides search volume, cost-per-click, and keyword difficulty (competition) for each keyword.

Google Keyword Planner

Google Keyword Planner is another free tool to find your keyword’s cost per click for your ad campaigns.

The tool directly fetches data from Google Ads. You need to follow the below steps to find your Google ads cost per click,

  1. First, open the tool and click ‘Discover new keywords’.

    Discover new keywords in Google Keyword Planner

  2. Enter your main keyword in the box provided under the ‘Start with keywords’ tab.

    Entering keyword in Google Keyword Planner

  3. You will get a list of related keyword ideas under the primary keyword you have provided.

    Related keyword ideas in Google Keyword Planner

  4. You can find the CPC of each keyword under the two columns appearing on the right side of the table.

Keyword’s CPC in Google Keyword Planner

These two columns stand for,

Top of page bid (low range) – The lowest amount ever paid for that keyword to rank at the top of the search results page.

Top of page bid (high range) – The highest amount ever paid for that keyword to rank at the top of the search results page.

This data helps you to determine your budget for ranking at the top of the search results for these keywords.

How To Reduce Your CPC?

The following are the most effective ways to reduce your cost per click and gain maximum benefit from your CPC marketing.

Improve Google Quality Score Of Your Ads 

Google’s Quality Score is a metric that measures the effectiveness of your ad compared to ads posted by other advertisers.

Components of Google Quality Score

It measures the following three components and provides a quality score for your ad on a scale of 1-10.

Expected Click-Through Rate: It measures users’ likelihood of clicking on your ad when published.

Ad Relevance: It checks how closely your ad satisfies the user’s search intent.

Landing Page Experience: It measures how relevant users find your landing page after clicking on your ad.

Following is a step-by-step guide to finding the Quality Score of your cost-per-click Google ads.

  1. Open Google Keyword Planner and click ‘Search keywords’ under the ‘Keywords’ drop-down. 

    ‘Search keywords’ in Google Keyword Planner

  2. Next, click the ‘Columns’ icon. 

    ‘Columns’ icon in Google Keyword Planner

  3. Click on the ‘Quality score’ section under ‘Modify columns for keywords’.
  4. Check the ‘Quality score’, ‘Exp. CTR’, ‘Landing page exp.’, and ‘Ad relevance’ options under ‘Quality score’ section and click apply. 

‘Quality score’ section in Google Keyword Planner

Now you can view your quality score and status of the other three elements in respective columns.

 

Quality Score and status of the other three elements in Google Keyword Planner

Now let us discuss how you can improve the quality of the three deciding elements to improve the overall Quality Score of your CPC Google ads.

How To Improve Your CTR?

If your target audience finds your ad relevant and appealing, they will click it more frequently.

 

Click through rate

That will boost your CTR, which, in turn, will increase your Quality Score.

The following tips will help you further improve your CTR,

  1. You must ensure that your CPC ads include additional information like location and call-to-action (CTA).
  2. Use enticing CTAs like ‘Shop’, ‘Buy Now’, ‘Sign Up Today’, ‘Order’, etc. to make users click your ads more.
  3. Make your ad copies more attractive by highlighting benefits like ‘Exclusive Deal’, ‘Effective Price After Discount’, ‘Free Delivery’, etc.
  4. You must ensure that your CPC ad copies satisfy users’ search intents.

How To Make Your Ads Relevant?

The more users find your CPC ads relevant to their search queries, the more likely they will click on them.

It would be helpful if you avoid posting your ad in broad groups targeting multiple groups of keywords to increase your ad relevance.

If you target several ad groups instead of one single ad group, chances are high that users will see and click on your ad.

For example, instead of targeting one ad group for ‘leather jackets’, you can split your target for the following ad groups,

  1. leather jacket women
  2. mens leather jackets
  3. Black leather jacket

You must ensure that each of the above ad groups targets multiple specific keywords.

Let us consider the first ad group, for example.

‘Leather jacket women’ can target keyword groups like ‘leather jacket women slim fit’ and ‘leather jacket women lightweight’.

However, you must ensure that you create ad groups around the keywords you have bid for. 

How To Optimize Your Landing Pages?

The effectiveness and cost of your cpc marketing campaign significantly depend on your landing page quality.

The following tips on creating high-quality landing pages can improve your overall quality score.

 

Landing page relevance

  1. You must ensure that users find your landing page (product) relevant to their search intent.
  2. There should be clarity among users about the purpose of your landing pages.
  3. Your landing pages should be easy to navigate.
  4. You must ensure your landing pages load fast.
  5. Search bots should not find it difficult to crawl your landing pages.
  6. Your landing pages must include the link to your business information page.

Consider Bidding On Long-Tail Keywords

Long-tail keywords are the search terms that searchers use to search for something particular.

Performance of long-tail keywords

Long tail keywords have a relatively lower monthly search volume than seed keywords.

But they are relatively less expensive and easy to rank. Using them in your CPC ad copies can attract highly targeted organic traffic.

Add Negative Keywords Effectively

Popular publishing platforms are costly, and you must spend your ad budget wisely.

You should not waste your campaign’s budget by showing your cost-per-click ads for irrelevant search terms (keywords).

You can ensure that by implementing negative keywords (irrelevant search terms) effectively in your Google Ads.

You need to follow the below steps for that,

  1. First, open your Google Ads account.
  2. Next, click on ‘Search terms’ under the ‘Insights and reports’ drop-down menu. 

    ‘Search terms’ in Google Ads

  3. It will show a list of keywords your ad can appear for. 

    List of keywords in ‘Search terms’

  4. Next, you must identify the irrelevant keywords for your ad and check the adjacent box.
  5. Then, you must click on the “Add as negative keyword” to include them in your reject list. 

    Selecting and adding negative keywords

  6. You can assign that list of negative keywords to any of your specific ‘ Ad group’, ‘Campaign’, or, ‘Negative keyword list’. 

Assigning “Add as negative keywords to”

You can significantly reduce the cost of your CPC campaigns by implementing negative keywords effectively.

Schedule Your Ads Wisely

Timing is equally vital in bidding, like choosing the right keywords.

Scheduling your CPC ads allows you the following,

  1. You can make your ad visible when the chances are maximum that your target audience is online.
  2. You can also adjust your bidding during those pick hours.

That helps you lower the cost of your CPC campaigns and boosts your conversion rate.

Google Ads lets you find the days and times yielding the best results for your CPC ad campaigns.

The ‘Day and time’ column of the ‘Ad schedule’ page provides that data.

Days and times yielding best results for your CPC ad campaigns.

You just need to click ‘Ad schedule’ after clicking on ‘Show more’ to schedule your ad during those effective hours.

Scheduling ads in Google Ads

After that, you need to select the campaign for which you want to schedule your ad by clicking on the ‘pencil’ icon.

Pencil icon for selecting the campaign for ad schedule

You can edit the schedule for specific days and times.

Editing and saving your ad schedule

Lastly, you must click on the ‘Save’ button.

Use Geo Targeting

You can choose specific countries, areas within a country, locations, and location groups where you want to make your ad visible.

Google Ads also allows you to include your operational area and other areas of your interest in location groups.

You can set up geo-targeting in your Google Ads account by following the steps below,

  1. Click on the ‘Show more’ drop-down menu under the ‘Change history’ option.
  2. Next, click the ‘Locations’ drop-down menu and click the ‘Locations’ option. 

    Location targeting in Google Ads

  3. Next, you must click the pencil icon and enter a specific location or radius you want your ad to target. 

Adding location or radius in Google Ads

You can also add multiple locations by checking the “Add locations in bulk” box. Lastly, you must click the ‘Save’ button.

Use Different Types Of Keyword Matches

Keyword match decides the matching requirement of keywords with the searcher’s query to show your ad.

There are three types of keyword matches in Google Ads,

Keyword Match types in Google Ads

Broad match – Your CPC ad may appear on searches related to your target keyword.

Phrase match – Your ad campaign may appear on searches that include the meaning of your target keyword.

Exact match – Your ad may appear on searches that include the exact keyword you have targeted.

Though keywords with exact match types provide more targeted organic traffic to your ad campaign, they come with a higher price tag.

On the other hand, keywords with broad matches bring lesser traffic to your ad but are available at a much lower CPC.

You can blend different keyword match types to optimize your cost-per-click Google Ads.

Implement Device Adjustments

You can manually adjust your maximum cost per click across different devices depending on the device-specific behavior of your target audience.

For example, your ad may get healthy clicks and impressions on mobile devices, but the conversion rate is low. That means your mobile audience is browsing your ad frequently, but most of them ultimately need to buy the product. 

You can check the customer behavior across different devices in Google Ads by following the below steps,

  1. Click on ‘Insights & reports’ available under ‘Recommendations’ in the left-side menu.
  2. Next, click on the “When & where ads showed” from the ‘Insights & reports’ drop-down menu and then click on the ‘Devices’ tab.

‘Insights & reports’ drop-down menu in Google Ads

Then, you can manually adjust your bids across specific devices.

Conclusion

Cost per click is one of the most popular online advertising revenue models in the PPC category.

You need to pay an amount to the publishing platform each time a searcher clicks and views your ad.

You must ensure that you find the most relevant keywords to your business to target through your CPC ad campaign, write a compelling ad copy, and optimize your landing page in line with your ad to gain the maximum benefit from your CPC campaign.

You must try to lower the cost of your CPC campaign by improving your ad’s Google Quality Score, bidding for long-tail keywords, adding negative keywords effectively, scheduling your ads for peak traffic hours, using location-based targeting, targeting different keyword match types, and targeting the suitable devices.

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