Advertising has changed a lot over the past few years and one of the game changers is social media platforms. Many investments are being directed to advertising and marketing digitally. Some of the areas that people are concentrating on are search advertising, as well as display ads. It is always important to know all the metrics to come up with an advertising campaign that works perfectly.
When we think of cost-per-click, it is a representation of how much cost the advertiser incurs once anyone clicks on his/her advert. In order to run new campaigns, some platforms have a requirement that one should have a cost-per-click target. This is what makes people wonder how they can determine the ideal cost-per-click.
There are a lot of determinants for this. The cost-per-click is never uniform and there are many factors that affect it. The factors include the targeted audience, the kind of advertising that you are utilizing, as well as the advertising platform that you choose. Others include the kind of service or product you are marketing and the bidding strategy being applied. You need a cost-per-click that allows you to get an ROI that is favorable.
ROI determination
The cost-per-click can be easily determined by the ROI that you are targeting. The best ratio is 5:1 which is the revenue to ad ratio. This is to mean that when you spend a dollar on advertising, you should revenue of five dollars. This is to mean 20% CPA (cost-per-acquisition).
Price and its impact on CPC
Advertising on search engines is one of the place to see the usage of CPC. Many of the ad platforms that are available online are actually auction based. It is up to the advertisers to make a determination on the kind of money they want to pay for every click achieved. People who pay more usually get the ads placed at a higher level in search results and they appear in the newsfeed.
When your service or product is expensive, then competitors will be willing to pay even more for every click. If your service or product is not expensive, then you cannot afford a cost per click that is too high.
Usually, websites don’t make any direct sales online, they offer a form or a number where the visitors can fill out and this is given to the sales team. In order to know your cost per click, you should factor in the close rate. This is simply the rate at which the sales team can turn the leads into customers.
Lifetime value
Your target CPA and CPC are usually increased by the lifetime value. This is where the customer lifetime value is considered. In order to make a good valuation, you will have to consider the kind of business they are most likely to refer to you as well as any repeat business. This is something that ends up increasing the value of customers way beyond the first purchase that they make. This also increases the kind of money you may be willing to pay to get customers.
When the lifetime of a customer is high, it may be a justification of the high CPA on the first purchase. There are businesses that may be ready to make a loss or break even when dealing with the very first transaction. When you advertise with tighter margins, you should be very confident of the lifetime value calculations that you make.
The best CPC can be determined by the ROI that you are targeting. Many businesses place it at 20% CPA. That is the 5:1 ratio, which is generally acceptable. The formulas for CPC should be applied to come up with an accurate CPC for your campaigns.
CPC and eCommerce advertising
Many online businesses depend on CPC, which makes them very important. This is why you need to monitor them to have a healthy return on investment. Pay per click is usually utilized by different platforms such as Facebook and Google AdWords. To make marketing efficient and speedy, you have to understand how much the campaigns cost. You should then try to tie them to a goal, which you have set for your business. The clicks that every advert gets in an ad campaign indicate the kind of attention that your business is getting on an individual basis.
CPC interpretation with advertising in mind
It is important to measure CPC but you cannot do it in a vacuum, when you identify the CPC, you will be able to calculate ROI quite efficiently. You should note, however, that some keywords that have a high CPC tend to produce a much better ROI because of the conversion rates that are heightened. Once you have made a determination of the CPC, you can easily find out whether the company is under spending or overspending on the marketing efforts.
You need to analyze the cost per click according to the cost and value. You should not simply pay for clicks that do not bring up any results in bringing traffic. The quality of traffic is usually gauged by the conversion rates as well as the cost per acquisition on average.
Identifying the clicks that are valuable is very important in helping you maximize the PPC advertising value.
The auction process
The auction process is usually performed whenever an AdWords ad is qualified to appear. This process helps in determining if the ad appears within a certain search and the order of appearance.
The system usually finds keywords that match a given search
The keyword groups that are not qualified to appear because of reasons such as geographic location are usually ignored.
After this, the Ad Rank is used in selecting the ads that remain. This is usually done according to the ad quality and the impact projected.
You may notice that even with a lower bid, you may still get a high position because of using the relevant keywords as well as ads. The position of the ads can fluctuate because of the differences in competition for the various keywords.
Category: online marketing
Keywords: cost per click, PPC, CPC
Tags: digital marketing, Cost-per-click, digital advertising
