What You Must Know about CPC Hoax

More than often people are stuck on a single metric when they bid for keywords on Google AdWords and that is CPC or the cost per click formula. Some marketers have got the AdWords facility all wrong as they obsess too much over costs. Yes, the cost factor is true as it increases with more competitors advertising on the same platform. The PPC advertisers do tend to get worried a by the cpc calculation which is supposedly a big pain for them as it can potentially & quickly drain their budget. Ultimately they concentrate on the amount that they will have to spend.

Well, that is where most get it wrong. In place of CPC, the main concern of people should be what they get back in return, meaning return on investment (roi). It is not CPC’s that should matter to create high ROI Ad campaigns. As a matter of fact, you may often be misled if constantly worry about keyword costs. Rather, it is something very different that needs to be analyzed to ensure that you aren’t leaving loads of money on the table. No doubt, CPC is an important aspect but is only a tiny piece in a large pie.

When the budget is the bottom line, the concern must be of CPA or cost per action. The cost per click cost per action come hand in hand as the previous drives the latter but, the latter is much more important because that is what generates the revenue which is the thing that matters in business.

Let’s have look at why CPC doesn’t matter!

Platforms such as Bing, AdWords, and Facebook are PPC-based platforms that tend to look more at those metrics that don’t really analyze how the ad campaign is going on. The vanity style metrics that they emphasize more on are bids, clicks, impressions etc. Likewise, cost per click is also among the vanity metrics that shouldn’t matter as they do to marketers. This is due to the simple fact that when the concern is of bidding cost on a PPC platform, the sole thing that actually matters is the CPA or cost of action or acquisition. Seems unbelievable, is it?

Well, here’s an example to make it clear. Suppose, on AdWords Keyword Planner you are researching a keyword and on a per click basis, the keyword costs 33$ on an average. After deducting the number of clicks it actually takes to get the conversion on adwords, 33$ on a single click might come across as unbelievable but, it isn’t that expensive when you break it down because it all depends on the product that you’re selling.

Say, for instance, you have an e-commerce product worth 15$. In that case, it doesn’t make sense to pay so much one click. However, if the product is of 5,000$, $33 per click shouldn’t include a huge chunk of the overhead. The fact is generic or popular terms are not very expensive. So, Average CPC’s are not that heavy bearing. On the flip side, long tail keywords cost a tad bit more. It is difficult to take ‘industry average standards’ to make an in-depth analysis because if you compare the cost differences between tax and file back taxes, you’ll see that it’s not even close. The main equation is that of the conversion rate which leaves a greater impact than costs.

The cost per lead or action cannot be higher than the bottom line of the advertisers on Google. What is the big deal if a single click costs you 33$. The CPC becomes relative when the product that you are selling is worth $5,000. It is the Cost of acquisition where you focus should actually be. If you making a profit on each sale, then CPC comes down to be irrelevant. Creating a roi advertising campaign is what matters at the end of the day. Investing twice as high on CPC rather will be worth it when you realize that you’re generating twice as much revenue.

You may pull out the plug either too early or too late:

The major difference between big and small companies is this that the first doesn’t hesitate to spend much on advertising but, the latter does. The bigger organizations do not blindly spend loads on advertising. At the end of the day, they actually get back a bigger number. But why don’t smaller companies invest much in advertising? The main reason for it is that they obsess too much over CPC cost in place of revenue. Just because they see that lead doesn’t start to flow quickly but the ad spend number keeps rising, they end up pulling out the plug too soon.

Rather, these companies should let the ad campaign run a little longer at least for a minimum of 45 days before halting it. Similarly, the campaign back off when CPC’s begin to edge. Likewise, the lead flow also stops. Thus, in place of CPC’s, CPA is a better target.

Overcome outside factors by increasing the revenue side:

Since the companies have a tendency to worry about the more and more expenditure on keywords, the put blinders on. This is how companies end up neglecting important aspects like repurchases and optimizing conversions. With higher average order values you get more repeat purchases. So, the bottom line is this that you extract an increased number of purchases of the same customers and the good news is, mostly to achieve this you rarely have to spend a penny. A simple email campaign will suffice to persuade the loyal customers. Thus, you can maximize your revenue with more sales without the need of increasing the expenditure of ads. The best part about this is that you need not sweat any CPC whatsoever for this. What you did here is paying at the top end of the budget in order to maximize the opportunities. Post that, it is the other side of the equation that you double-down. Ultimately what truly matters is to optimize the ad campaign ROI and the revenue spent plus the increased rate of conversion acts as a lever in this case.