Cost-per-conversion (CPC) is a crucial metric for businesses and advertisers running pay-per-click (PPC) campaigns, as it helps them measure the effectiveness of their advertising efforts. In PPC advertising, businesses bid on keywords or phrases related to their products or services and pay a fee each time someone clicks on one of their ads. The cost-per-conversion, therefore, refers to the amount of money a business spends to acquire a single conversion from a PPC ad.
CPC is an important metric because it helps businesses understand how much they are willing to pay for each conversion. By understanding their cost-per-conversion, businesses can optimise their PPC campaigns to increase the number of conversions they get for their budget.
To understand cost-per-conversion, it’s important to first understand what a conversion is. In the context of PPC advertising, a conversion is any action that a user takes on a website after clicking on an ad. This could be anything from making a purchase to signing up for a newsletter.
To calculate cost-per-conversion, you first need to determine the total amount of money you have spent on PPC ads. This is known as your total ad spend. Then, divide your total ad spend by the number of conversions you have received from those ads. The result is your cost-per-conversion.
For example, let’s say you have a PPC campaign that has generated 100 conversions and you have spent £1,000 on the campaign. Your cost-per-conversion would be £10 (£1,000 / 100 conversions).
It’s important to note that cost-per-conversion can vary widely depending on the industry and the competitiveness of the keywords or phrases you are bidding on. Some industries, such as insurance and legal services, tend to have higher cost-per-conversions because of the high value of the products or services being offered and the competitiveness of the industry.
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Factors that Affect Cost-per-Conversion
There are several factors that can affect cost-per-conversion, including:
- Keyword competitiveness: The competitiveness of the keywords or phrases you are bidding on can greatly affect your cost-per-conversion. If you are bidding on highly competitive keywords, you may have to pay more for each conversion.
- Quality Score: Google uses a metric called Quality Score to determine the relevance and quality of your ads. The higher your Quality Score, the lower your cost-per-conversion will be. Factors that can affect your Quality Score include the relevance of your ad to the keyword, the relevance of your landing page, and the overall user experience of your website.
- Ad relevance: The relevance of your ad to the keyword being searched can also affect your cost-per-conversion. If your ad is highly relevant to the keyword, you are more likely to get a lower cost-per-conversion.
- Ad position: The position of your ad on the search results page can also affect your cost-per-conversion. Ads that appear higher up on the page tend to get more clicks and, therefore, a lower cost-per-conversion.
The Importance of Cost-per-Conversion
Cost-per-conversion is an important metric because it helps businesses understand the effectiveness of their PPC campaigns. By understanding their cost-per-conversion, businesses can determine whether their PPC campaigns are generating a positive return on investment (ROI).
There are several steps businesses can take to optimise their cost-per-conversion:
- Focus on high-quality keywords: By focusing on high-quality, relevant keywords, businesses can improve their ad relevancy and Quality Score, which can result in a lower cost-per-conversion.
- Improve ad copy: Crafting compelling and relevant ad copy can improve the chances of users clicking on your ad, which can lead to a lower cost-per-conversion.
- Optimise landing pages: Ensuring that your landing pages are relevant and optimised for conversions can improve your cost-per-conversion. This includes making sure the page loads quickly, has a clear call-to-action, and offers a seamless user experience.
- Utilise negative keywords: Adding negative keywords to your PPC campaigns can help filter out irrelevant traffic, resulting in a higher quality of leads and a lower cost-per-conversion.
- Implement conversion tracking: Setting up conversion tracking allows businesses to see which of their PPC campaigns are generating conversions, helping them identify areas for improvement and optimise their cost-per-conversion.
CPC and Invalid Traffic Prevention
Invalid traffic, also known as ad fraud, is a growing concern for businesses and advertisers running PPC campaigns. Invalid traffic refers to clicks on ads that are not generated by real users, but rather by bots or other automated processes. This can result in wasted ad spend and a higher cost-per-conversion.
To help prevent invalid traffic and improve PPC performance, businesses can utilise tools like Lunio. Lunio is a comprehensive invalid traffic prevention solution that helps advertisers and PPC specialists prevent wasted ad spend on fake touchpoints, improving conversions, ROI, and driving performance marketing efficiency.
Frequently Asked Questions
What is a good cost-per-conversion?
The ideal cost-per-conversion will vary depending on the industry and the value of the product or service being offered. However, a general rule of thumb is that a cost-per-conversion should be lower than the value of the conversion. For example, if a product has a profit margin of £50, it would be ideal to have a cost-per-conversion of less than £50.
Can I lower my cost-per-conversion by increasing my ad budget?
Increasing your ad budget can help increase the number of conversions you receive, which can potentially lower your cost-per-conversion. However, it’s important to keep in mind that increasing your ad budget can also increase your total ad spend, which can offset the benefits of a lower cost-per-conversion. It’s important to carefully consider the trade-off between ad budget and cost-per-conversion when optimising your PPC campaigns.
Is it always necessary to focus on lowering my cost-per-conversion?
Not necessarily. While lowering your cost-per-conversion can be beneficial, it’s also important to consider other factors such as the overall ROI of your PPC campaigns. If your PPC campaigns are generating a positive ROI, even with a higher cost-per-conversion, it may not be necessary to focus solely on lowering it. It’s important to consider the bigger picture and the overall effectiveness of your PPC campaigns.