Never let ads write checks your website can’t cash – Avinash Kaushik, a digital marketing evangelist.
We get excited about pay-per-click advertising (PPC), knowing how powerful it is in generating traffic and revenue. But, as a business owner, you don’t want to simply run campaigns that break even on your investment; you want to outrank your competitors, earn valuable searches, and get them to click your ads. That is, you want to learn and apply the right ad optimization techniques.
There are many factors involved in running a successful PPC campaign. One of these is cost-per-click (CPC). Stay with us to learn what CPC is, how it’s calculated, other common metrics, and 4 tried-and-true PPC optimization best practices.
What is CPC? What is the Difference Between PPC, CPC, and CPA?
PPC can be run on different platforms such as Bing, Facebook, or Amazon; each with its own ad optimization techniques. For the purposes of this blog, we will focus on Google Ads which is Google’s PPC advertising platform.
Google Ads is Google’s way to get your business, brand, product, or service in front of your target user. It allows you to bid on keywords so your ads show in Google’s search results when a user types a query. With Google Ads, you only pay when someone clicks on your ad.
CPC is the final cost or actual cost you pay for a click based on the keywords that you are bidding on. You can set a maximum CPC – this is the most you’re willing to pay for a click on your ad.
Cost-per-acquisition (CPA) is another metric commonly used by digital marketers to measure PPC advertising performance. CPA is the cost you pay for a conversion from your ad. CPA will differ based on industry — for example, in eCommerce, it is the cost incurred to acquire a sale.
Tracking both metrics is key to PPC optimization. However, one first needs a click before the user is converted. So, let’s dive deeper into CPC.
How to Calculate CPC?
There are many factors that come into play when calculating your CPC. According to Google, actual CPC is calculated based on Ad Rank. This is calculated using many elements including, but not limited to:
- Ad quality
- Ad relevance
- The landing page experience
- The competitiveness of an auction
The combination of these factors generates the lowest dollar amount required to clear the Ad Rank threshold and beat the Ad Rank of the competitor immediately below you. And with this rather complicated process, you have your actual CPC! To calculate CPC, you can use the formula below:
Competitor Ad Rank / Your Quality Score + 0.1 = Actual CPC
Note that your actual CPC could exceed your max CPC if you’ve enabled enhanced CPC or set a bid adjustment.
4 Tried-And-Tested Recommendations for PPC Optimization
In this section, we’ll dive deeper into some PPC optimization techniques that are simple to follow and apply:
1. Improve Your Quality Scores
Keyword research forms the backbone of your PPC strategies. Invest considerable time in thorough keyword research and group these into ad groups that better match your user’s searches.
Then, use these keywords to write ads which are highly relevant. Keep in mind the intent of your keywords, as this will help you write ads that match your user’s needs and improve your click-through rate (CTR).
The use of ad extensions (being rebranded as ‘assets’’) is another great hack to increase CTR, which indirectly increases the quality score. Including as many ad extensions as possible in your ad will increase the space used in SERPs and provide more useful information to the searcher.
Speaking of the visitor’s experience, it doesn’t end there! Once the user visits your website, they will want to see what they’re looking for. Therefore, your landing page should stay consistent with your ad copy; keeping the messaging coherent.
The combination of keyword research, ad relevance, expected CTR, and landing page relevance will collectively improve your quality scores and reduce your CPC (see the ‘calculate CPC’ formula above).
2. Work With The Machine Rather Than Against It
As pseudo-AI programmers, PPC consultants think about what queries or keywords people are entering in their search engines. These keywords are entered in an ad group which has at least one ad associated with it.
When a user types in a query which happens to be in the list of keywords, it will trigger your ad. With Google Performance Max, your ads can be shown in various formats across Google’s other channels.
With increased automation and AI-enabled ads technologies, Google has simplified a large portion of the day-to-day PPC campaign optimization. Give Google a list of keywords (the input) and it will automate an ad (the output) — the traditional way.
But beware not to add too many keywords in each ad group, as this risks losing relevance. We’ve consulted with Google representatives that recommend having approximately 25 keywords in each ad group. As Cathal Melinn noted in his recent webinar “one piece of Ad Text that tries to service many different keywords won’t be relevant to all of them”.
We believe in working with the machine in balance. Your automated ads require human guidance because they need to highlight your brand’s voice in order to be successful. Check them consistently to ensure relevance to your brand messaging.
Don’t hesitate in also using the SKAGs model despite the current rhetoric as part of ad optimization techniques. While most digital marketers focus on keywords, this model allows you to focus on queries, to some extent. With this model, you:
- Identify ads that are performing well
- Analyze keywords associated with them
- Identify the top performing keywords
- Create very specific ad copies that lead to relevant landing pages
- Generate higher average CTR
With this coherence between the query, the keyword, ad and landing page, you are more likely to get a conversion. It collectively increases your quality score, which leads to reduced CPC. This method is also the only way you can set target CPA and target ROAS on your keywords.
Thus, you are working with the machine to link top keywords to specific ads while using human intelligence in identifying those keywords and having human control on your bid strategies.
There are merits and caveats with both strategies; which is why we recommend understanding your business and the industry you operate in. Advertising in niche industries like pharmaceuticals will have very specific queries. Implementing SKAGs would be ideal!
The chart above shows a significant rise in all metrics. These excellent results no doubt pleased our client for whom we provide PPC marketing services. In this case, we changed their campaign structure from SKAGs to traditional which better suited the luxury closet remodeling industry they were operating in.
3. Use Branded and Non-Branded Terms
Research shows branded terms account for 10% of all queries whereas non-branded or informational terms account for 90%. Yet we see many digital marketers choosing to advertise using their brand name.
That’s because branded keywords are more likely to convert than non-branded. They have less competition and lower CPC, driving higher conversions. They also resonate with their audience – these users are aware of the brand or are repeat customers.
In comparison, non-branded keywords have a higher CPC but increase visibility and brand awareness, eventually helping drive new customers. If you are a new business or an existing business launching a new product or service, then running non-branded ads is beneficial.
We recommend implementing a mix of both, depending on your goals. Pharmaceutical companies, for example, advertise using a mix of branded and non-branded terms to raise awareness of their new medications with an effort to raise sales indirectly.
Both advertisements above are for the same medication by the same two drug companies. One using a non-branded keyword (type-2 diabetes) aimed to inform the user while the second using the branded keyword (Jardiance) aimed to achieve that sale from an already well-informed user.
Thus, your non-branded ads enable your users to come down the sales funnel which you may ultimately see as a quick conversion from your branded ad.
In the case where you find yourself in a bidding war with competitors for your own brand name, we recommend applying these PPC strategies:
- Optimizing your site-link extensions (also called site-link assets)
- Improving your landing page
- Creating brand remarketing campaigns
- Adding the words “Official Site” as a headline
- Creating a location extension that links to your verified Google Business Profile
- Creating more extensions to take up more real estate in the SERPs
4. Enable Display Expansion on Search Campaigns
Search ads are probably the most prevalent and popular PPC advertising strategies. Something that isn’t discussed in other blogs is that you can enable Display Expansion on your Search Campaigns. This will get you more conversions with unspent search budgets at a similar or lower CPC than the search ad.
Display Expansion with Search Network campaigns are recommended when your budget goals are not met or when you have low volumes. Because display ads serve as an awareness initiative, they’re an excellent add-on to spark interest from the upper-funnel prospects.
For a wider reach, try responsive ads as part of your PPC campaign optimization.
The Role of a PPC Consultant
A PPC Consultant works with the client to identify and design paid advertising opportunities to build brand awareness, enter new or penetrate existing markets, and drive sales.
Like the 4 Ps of marketing, a PPC consultant strategically implements tactics to place and promote your product (or service) on SERPs to win customers. And, with the right ad optimization techniques, achieve growth at a price right for you.