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Spending money is part of any advertising campaign, but unless you know how much you spend on each click or other action, there is no way to tell whether your campaign is effective. Learning how to use the cost per click formula to know your average spend per click gained is a great starting point.
The cost per click formula calculates exactly what it sounds like, how much you spend on marketing for each click that you get. There are multiple types of cost per click (CPC) calculations you can make.
You may see variations of CPC such as:
Each of these calculations provides a slightly different insight. When it is not specified, CPC or cost per click typically refers to the average cost for each click or average CPC.
The cost per click formula is incredibly straightforward, only requiring division.
CPC = (Cost of the advertising campaign) / (Clicks earned in the campaign)
The average CPC formula would use the totals for both of these figures, so you would divide the total cost of the advertising campaign by the total number of clicks the campaign earned.
Even if calculating the cost per click is straightforward, you may be hesitant to take the few seconds or minutes required to calculate it. However, you should know that it is time well-spent, as being aware of the CPC can provide numerous benefits.
i. Make Adjustments to Your Budget Allocation
The biggest reason to use the CPC formula is so that you can better allocate your Google Ads budget. For example, you can move some of your budget from keywords with a high cost per click to those with a lower CPC. You can make similar changes with various ad types as well.
ii. Find Areas to Reduce Your Costs
You can also use the CPC to spot areas in which you can reduce the overall costs of your campaign. This comes from looking at the keywords with a high cost per click and then taking steps to reduce that figure.
iii. Can Automate Bidding
Once you understand your typical cost per click, you will be ready to automate the Google Ads bidding strategies. This can save you time, freeing you up to focus on other marketing efforts.
With the CPC formula clearly in your mind, you can start to look at your marketing strategies to reduce your cost per click. Some of these will focus on reducing costs, while others focus on increasing clicks, and yet others combine the two. Following are few strategies to be taken care:
Look at the results of your cost per click formula and see which keywords are performing poorly, either with a high CPC or not enough total clicks. Reconsider whether you still want to campaign for these keywords but on a reduced budget or if you want to eliminate them.
Remember that Google lets you pause an ad campaign. Use that feature, so you don’t have to reenter all the information and set up the structure again if you decide to try the same keywords in the future.
Even if you do not eliminate poor-performing keywords from your campaigns, reducing their budgets will give you a lower CPC. It also frees up some of your budget for other methods on this list, such as expanding into other potential keywords.
One of the best ways to reduce your cost per click is to improve your Quality Score.
To improve your Quality Score, you can take several steps, including:
i. Create Ad Groups That Are Closely Related
Creating tightly themed groups for your ads is one of the most popular methods of improving your Quality Score. To do this effectively, organize the ad groups and keywords based on services and products. If, for example, you sell motorcycles and accessories, you would create separate ad groups for motorcycles and each type of accessory, such as helmets.
ii. Improve Your CTR by Making Sure Ads Are Relevant and Compelling
If you can improve your Click through rate, you will end up with a larger number of total clicks, reducing your cost per click formula calculations. To improve that click-through-rate, take the time to carefully craft your ads. They should be relevant to your target audience as well as compelling.
iii. Optimize the Landing Pages and Ad Text for Search Content
Make sure that your landing pages match the content of the ad, as this will reduce your bounce rate and show Google that you have high relevance. This typically means creating different landing pages for different ads, depending on their purpose or target audience.
As a bonus, this will also help you with conversions, as people are more likely to find your landing pages useful if they match the ideas of the ads they clicked on.
iv. Use Negative Keywords to Maximize Ad Relevance
Negative keywords let you stop your ads from showing for users who will likely find them irrelevant. We will go into more detail about this later.
A fairly obvious method of reducing your cost per click is to lower your bids. This can work well in some situations, but that is not always the case. To decide if this is an option for you, look at your average bid position. If you are in the first or second spot, you could probably reduce your bids slightly and still display your ads. The difference is that you would have a lower CPC, so you could afford to pay for more clicks, increasing your overall clicks and lead generation.
You can also improve your CPC formula results by finding more keywords that deliver results in the form of clicks. Do some research to find potential keywords that might be successful? A good option is to look for variations of popular keywords. The best way to do this is with keyword planning tools, as they automate the research for you.
Give them a try, but do so with some of the budget from poor-performing keywords. Do your best not to increase your overall ad spend while expanding to use new keywords. After all, if you do not get the clicks you want from your new keywords, spending more would increase your CPC.
As you look for new keywords to target, start by considering those with lower bids. It should go without saying that keywords with lower bids will result in a lower cost per click.
Sometimes, you can reduce your cost per click by changing the match type while keeping the keywords the same. You can test this with different ad groups or match types. For example, maybe Broad Match Modifier is much more affordable than Exact Match, or vice versa. In this case, you could opt for the match type that has a lower CPC to save on costs.
Remember that you do not have to run the campaign to get an estimate of what your costs will be. Just create the campaigns on Google Ads and pause the campaign. Look at the estimates for the first page and the top bid. Then, compare that information across your newly created campaigns.
Negative keywords are another incredibly useful tool for reducing your cost per click. When you have negative keywords set up, you will get less traffic from people searching for terms that have a low chance of resulting in clicks or conversions.
Remember that using negative keywords can improve your Quality Score, as you will have a higher relevance rating. That higher Quality Score will reduce the amount you have to pay for each click.
In addition to the boost to your Quality Score, the negative keywords will directly reduce your CPC by stopping you from spending money on ads that do not get clicked on or result in conversions. This can reduce your spending without reducing your clicks since those negative keywords are unlikely to lead to clicks anyway.
Choosing to use long-tail keywords has a similar effect as adding negative keywords, as it increases your relevance and helps you appeal mostly to searchers who are likely to be interested in your products or services. As a bonus, long-tail keywords also tend to have less competition from other advertisers because they are specific.
Overall, using long-tail keywords can help you reduce your cost per click in several important ways:
To make your ads even more relevant, consider using the geotargeting feature in the Google Display Network. Google lets you choose where your ads get displayed, letting you focus your efforts on the areas where you are most likely to find customers, or at least people willing to click on your advertising.
If you are concerned about high costs per click, you should consider whether you want to opt for manual bidding instead of automated bidding. This is not for everyone, but it gives you increased control over bidding, letting you keep costs low.
Set a Maximum CPC
Perhaps the most important feature of manual bidding is the ability to set your maximum CPC. You can set a maximum for ad groups as a whole or even for individual placements and keywords. Right from the start, you can reduce the cost for keywords with a higher CPC than you want.
If you prefer to use an automated bidding strategy, consider the Maximize Clicks strategy. It will increase your clicks, so you can lower your overall cost per click.
This bidding strategy will automatically adjust your bids, so you get the maximum clicks without going over your budget. All you need to do is choose your average daily budget. Google Ads will do the rest.
There is also the option to set bid limits when using this automated strategy. Just keep in mind that while it gives you more control and brings down costs, it can reduce your clicks as well.
Before using this strategy, however, think about your ultimate goal. If you know which keywords lead to the most conversions, you may want to use a different automated bidding strategy instead. But, if you do not know which ones lead to the best profits, focusing on gaining clicks is a solid strategy.
You can look at your keyword analytics to see what times of the day or days of the week you are most likely to get clicks and conversions. Then, schedule your ads, so they only appear during the times you have lower costs per click or higher conversions.
This helps by reducing the amount of money you spend on ads that people are unlikely to click on. At the same time, you are unlikely to see a significant reduction in the number of clicks, as you specifically chose those times without many clicks.
The result is that this method of scheduling your ads makes helpful changes to both important parts of the cost per click formula: it reduces the costs without reducing the clicks.
Once you know how to use the CPC formula to calculate your cost per click, you are ready to make changes to reduce your costs. From improving your Quality Score to adjusting your keywords to changing when you display your ads, there are plenty of ways to lower your cost per click.
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