This is the 2nd post in the SEM Beginner Series, the first introduced click-through rate (CTR). This series of posts is intended for those new to search engine marketing who are looking for some guidance to help identify, monitor and adjust the key performance indicators (KPIs) that determine how successful a PPC campaign is.
What Is Cost-Per-Click (CPC) and Why Is It Important?
Cost-per-click refers to the amount of money you're charged for an individual click in your PPC campaign. Cost-per-click is not the same as the bid amounts you enter for your keywords. When you enter bids, you're putting in the highest amount you're willing to pay for a click (similar to proxy bidding on an eBay auction), but that amount may not necessarily be your CPC. Let's say you enter a $2 bid for some of your most popular keywords. If other advertisers have entered bids in amounts less than $2, you will only be charged for the amount that puts you higher than the competition... so while your bid price may be $2, your actual CPC could be something like $1.05.
Cost-per-click is one of the KPIs you should monitor closely as you'll need to determine if you're getting a good return-on-investment (ROI) based on the number of clicks you're getting and how many of those clicks are turning into sales. The most commonly used calculation for ROI is (Revenue - Cost) / Cost * 100.
CPC as a Key Performance Indicator (KPI)
Cost-per-click is difficult to put into general KPI terms as there is no one-size-fits-all solution; no silver bullet range that's going to work for everyone. Using the ROI formula above, you should review your adCenter reports on a regular basis (include "Delivered match type" in the customization options) to make sure that you're keeping your CPC within a range that makes sense for your PPC campaign's goals.
The most common issue when it comes to CPC is that it's too high in relation to your ROI. If you find this is the case, there are several avenues you can explore to help bring your CPCs more in line with your goals. Below are some of the most common methods to help lower CPCs:
- Lower Bids Review your bid prices and CPCs in relation to your positioning and see if perhaps you could stand to lower your bids. First position, while desireable in many instances, is not the only spot that will bring in qualified traffic; you may find more desireable CPCs in 2nd or 3rd position.
- Match Types Bidding across all match types within the same ad group can not only help lower CPCs, but increase impressions, clicks and CTR as well.
- Negative Keywords Using negative keywords helps to reduce unqualified traffic as it keeps your ad from displaying when search queries are not relevant to your ads.
Troubleshooting Tips
Now that you understand what cost-per-click is and how it's used as a key performance indicator (KPI), visit the below links for optimization tips and tricks:
Campaign Optimization Quick Reference Guide
adCenter Essentials and Paid Search Optimization Links List
Five Tips to Improve your Microsoft adCenter ROI
Microsoft Advertising Intelligence - Using the Pricing Tool for Bid Proposals and Budget Management
Optimizing Keywords and Match Types Using the adCenter Add-In for Excel
How Match Types Affect Your PPC Campaigns in adCenter
Researching Negative Keywords in adCenter
If you have any questions, feel free to leave them in the comments field below, or else visit our forums.