Library > Cost per click (CPC)

Cost per click (CPC)

Written By Alexandra Flygare & Jeremy Sacramento

Cost per Click (CPC) is a fundamental metric that measures the price you pay for each click on your digital ads.

Despite its prominence and widespread use, you’ve probably found userself wondering why and how to use this metric.

Well, you're in the right place. Let's break down what CPC is, why it matters in B2B marketing, and share some tips on how to make it work for you. 

What is cost per click (CPC)?

Cost-Per-Click is the price tag for every click your ad gets online. It's like paying for each visitor who comes to your website through your ads. 

CPC is a fundamental metric of Pay-Per-Click (PPC) advertising as it measures the amount advertisers pay each time a user clicks on one of their online ads. 

It works through a bidding system, where you put your bid amount on the keywords that are relevant to your potential customers. When those keywords are plugged into a search engine, your page is given in the results. 

True to the name, you only pay for your advertisement when someone clicks on your ad and ends up on your page. 

CPC is an especially useful metric on high traffic platforms like Google, Amazon, and Facebook. 

In B2B marketing, where the focus is on generating qualified leads rather than immediate sales, understanding and optimizing CPC is a good place to start for a successful digital strategy.

How do you calculate CPC?

CPC is calculated by dividing the total cost of advertising by the number of clicks received. The formula for calculating CPC is as follows:

CPC = Total Advertising Cost / Number of Clicks

For example, if an advertiser spent $500 on an ad campaign and received 1,000 clicks, the CPC would be:

CPC = $500 / 1,000 = $0.50 per click 

Using Cost-Per-Click in B2B vs. B2C

When we talk about CPC, there's a bit of a difference between using it for B2B vs. B2C.

Whereas in B2C, CPC is In B2B marketing, where the focus is on generating qualified leads rather than immediate sales, CPC is a good place to start for a successful digital strategy.

In B2B, the cost per click is usually higher. This is because each customer can be worth a lot more over time, and getting a sale often takes longer and involves more steps. So, businesses are willing to pay more for each click, hoping it leads to a big sale down the line. They're also trying to reach a very specific group of people, which can be trickier and therefore pricier.

For B2B marketers, CPC serves as an initial assessment of performance, rather than a method to direct immediate purchasing.

It is important to note: While CPC offers B2B marketers a straightforward way to gauge the cost effectiveness of digital ad campaigns, it falls short in capturing the nuances of B2B transactions. The long sales cycles inherent in B2B markets mean that a focus on CPC doesn't account for the prolonged journey from click to conversion. So metrics such as CPL or CAC are potentially more insightful for evaluating the true ROI and effectiveness of marketing efforts in the long run.

Dreamdata’s paid performance report gives you a unified view of your ad spend so that you can understand ad performance based ROAS and CPA rather than CPC alone.

How to lower your CPC

Why does Cost-Per-Click matter in B2B marketing?

Here's why CPC is an important metric for B2B marketers:

  • Budget Management: By understanding CPC, B2B marketers can allocate their budgets more effectively, ensuring that they're not overspending on underperforming ads.

  • Targeting Efficiency: A lower CPC often indicates that your ads are well-targeted and relevant to your audience, leading to higher click-through rates (CTR) and better conversion rates.

  • Market Insights: Analyzing CPC trends can provide insights into market competition and audience behavior, enabling B2B marketers to adjust their strategies accordingly.

B2B marketers are usually willing to pay more for each click because their customers are worth more per sale. 

Despite it being ‘only’ a leading indicator for B2Bs, it doesn’t mean we should throw money away needlessly. We still need to make sure we’re being as efficient as possible.

Here are a few ways you can lower their CPC and improve the efficiency of their campaigns:

  • Keyword Optimization: Conduct thorough keyword research and identify relevant keywords with lower competition and cost. Targeting long-tail keywords or niche-specific terms can often result in lower CPC.

  • Ad Quality and Relevance: Create compelling and relevant ads that resonate with the target audience. Ad platforms often reward well-crafted ads with higher ad rankings and lower CPC.

  • Landing Page Optimization: Ensure that the landing page your ad directs to provides a seamless and relevant user experience. Improving landing page quality can lead to higher click-through rates (CTRs), potentially reducing CPC.

  • Ad Scheduling and Targeting: Analyze your ad performance by time of day, day of the week, or specific demographics. Adjust your ad scheduling and targeting to focus on periods or segments that generate higher engagement and lower CPC.

FAQs

Q: What's the difference between CPC and CPM?

CPC (Cost per Click) and CPM (Cost per Thousand Impressions) are two different pricing models in digital advertising:

  • CPC charges advertisers based on the number of clicks their ads receive. Advertisers only pay when someone clicks on their ad, regardless of the number of times it's shown.

  • CPM charges advertisers based on the number of impressions their ads generate. Advertisers pay for every thousand times their ad is displayed, regardless of whether it's clicked or not.

Q: How does the bidding process work in CPC advertising?

A: In CPC advertising, advertisers participate in an auction-based system where they set bids on how much they are willing to pay for a click on their ad. Advertisers compete with each other, and the ad with the highest bid and quality score typically gets the top ad placement. The actual CPC paid by the advertiser is usually lower than the maximum bid, as it is determined by the second-highest bidder's bid and quality score.

Q: What factors influence the cost per click?

A: Several factors can impact the cost per click:

  1. Competition: The level of competition for specific keywords or ad placements can significantly affect CPC. Highly competitive markets may have higher CPCs due to increased bidding.

  2. Quality Score: Ad platforms like Google Ads consider the quality and relevance of ads and landing pages when determining ad rankings and CPC. Higher-quality ads with better user experiences often result in lower CPC.

  3. Ad Relevance: The relevance of an ad to the user's search query or browsing context can impact CPC. More relevant ads tend to have higher click-through rates, leading to potential CPC reductions.

  4. Ad Format and Placement: Different ad formats and placements may have varying costs. For example, ads displayed on premium positions or platforms may have higher CPCs compared to less prominent placements.

Q: Can I set a maximum CPC bid limit?

A: Yes, many advertising platforms allow advertisers to set maximum CPC bid limits to control their spending. By setting a maximum CPC bid, advertisers can ensure that they do not exceed their desired budget for each click.

Q: Can CPC be higher or lower than the initial bid?

A: Yes, CPC can be both higher and lower than the initial bid. While advertisers set their maximum bid, the actual CPC is determined through the auction process and is influenced by factors such as competition, quality score, and relevance. Advertisers may end up paying less than their maximum bid if the competition is low or if their ad quality is high.

Q: How does enhanced Cost-Per-Click work? 

Enhanced CPC, or eCPC, is a Google Ads bidding strategy that adjusts your manual bids in real-time to increase the likelihood of conversions, based on the likelihood that a click will lead to a sale. It uses historical data and conversion tracking to make bid adjustments for each auction, aiming to maximize your return on investment while respecting set bid limits. This strategy blends manual bid control with automated optimization to improve conversion rates.

Conclusion

In the B2B marketing game, CPC is a key player. It's not just about getting more clicks; it's about getting the right clicks. 

By fine-tuning your approach, you can make sure your advertising budget is working as hard as you are. So, there you have it – everything you need to start making smarter CPC decisions in your B2B marketing efforts. Let's make those clicks count!