Pay per Click Marketing

Cost Per Click (CPC) refers to the actual price you pay for each click in your pay-per-click (PPC) marketing campaigns. In this lesson you'll learn:

• A more thorough definition of cost per click.
• Why CPC is important to you and your PPC campaigns.
• How to lower your cost per click while maintaining (or even improving) traffic and conversion levels.

A "click" on one of your PPC text ads represents a visit, or an interaction with your company's product or service offering. Every click in a PPC campaign represents attention from a person who is searching for something that you offer. This attention is what you're buying, as an advertiser, so it's important to note two factors:

• What type of attention you’re going after, and
• How much you’re paying for it.

How Is Cost Per Click Calculated?

The actual formula for cost per click in AdWords is:

As an advertiser, your cost per click will always be less than or equal to your maximum bid, as it is an average of bids against a series of competitors over a period of time. Because of how Google's Adwords auction works, your actual cost per click is heavily influenced by both you and your closest competitor's ad rank, maximum bid, and Quality Score.

What Is The Average Cost Per Click in AdWords?

If your average cost per click is higher than these benchmarks, you're probably paying too much.

The Importance of Cost Per Click in Search Advertising

Since the overall ROI of your campaigns is determined by how much you’re paying for clicks and the quality of traffic they’re bringing in, it is important to think about cost per click in terms of both cost and value. You want to identify and target clicks that are both inexpensive and valuable.

Lowering CPC While Maintaining Value

So how do you go about lowering the price you're paying for each click, while sustaining (or even improving upon) the value of your visits? Two key paths of action come into play here:

Raise Your Quality Score – Google has created an automated system that offers pricing discounts to well-managed PPC campaigns with high Quality Scores. Currently, accounts with quality scores of 6 or higher (the average score today is 5) are granted a 16-50% decrease in CPC, whereas accounts with a 4 or lower Quality Score see a 25-400% increase in CPC!

Expand Your Reach – By discovering new, relevant and valuable clicks, the distribution of your budget will be improved substantially. To do this, you’ll have to find new PPC keywords and search advertising opportunities. But you can’t just expand without also paring back – you need to simultaneously eliminate irrelevant or overpriced clicks from your campaigns.