What is Cost Per Click and how can you reduce yours?
Updated: Jun 8, 2021
Cost Per Click or CPC, is a very important digital marketing KPI. However, most of the times it gets confusing to understand the concept in the most basic and practical manner.
So in this blog post, we answer the following questions to understand the concept better-
1. What is Cost Per Click?
2. What are the types of Cost Per Click?
3. What is the formula to calculate Cost Per Click?
4. How can you decrease your Cost Per Click?
5. What is the average Cost Per Click on various platforms?
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What is Cost Per Click?
Cost Per Click (CPC) can be defined as the cost, you as a marketer, pay the publisher, every time an online user clicks on your ad. It forms an important part of the overall umbrella of paid search marketing. The most important part to note in this is the difference between a click and impression. Cost Per Impression is a different metric altogether and will be covered as a separate topic later. Here, we are talking about users actually interacting with your ad. The best part about CPC is that you pay only when a viewer interacts with your ad, so there is a direct correlation between the money you spend and the traffic you direct to your website.
Let’s look at a story
Maya finally decided to pursue her dream and started her own designer boutique. While in her locality, she could spread the news through word of mouth, but her friends suggested her to indulge in some amount of digital marketing. She read up on a lot of content and decided to launch a CPC campaign on Facebook. The advantage was that her target audience was narrowed down, she would only have to pay for genuine traffic leading to her website, it was perfect. What more, she could also get analytics data to understand the interests of people who clicked on the ad.
There are two broad CPC types or formulas, based on which you can choose to run your campaign.
1. Flat Rate
This is when the website or search engines have pre-determined the amount they wish to charge the advertisers. This depends on multiple things but mostly with respect to the frequency with which other websites advertise with specific keywords.
2. Bid-based rate
This is what Google uses. This method works when advertisers set the campaign duration and also determine the maximum amount they want to spend per click. This maximum amount figure is the bid.
3. What is the formula to calculate Cost Per Click?
The formula used by Google AdWords for CPC requires you to have a quality score. This is nothing but a rating provided to you as an advertiser based on quality and relevance. The rating ranges from 1 to 10 and includes multiple parameters based on which it is derived.
Formula: Ad rank of the advertisement immediately below yours/your quality score + $0.01
Now, it’s crucial to understand the average CPC changes as per the region, and hence it’s important to factor that in while comparing your CPC with others.
4. How can you decrease your Cost Per Click?
Following four ways can be incorporated to reduce the cost you pay
1. Lower Bids
This is the most obvious and at the same time the most effective way to reduce the cost. When you lower your bids, you give Google a lower Max CPC to charge with respect to each of your ad clicks
2. Include Long Tail Keywords
These are those 3 or 4 keywords that are very specific to your area of interest. Now if you are operating in a highly competitive marketing scenario- chances are that your keywords might already be very pricey. To reduce the CPC then, you can include Long Tail keywords.
3. Improve your quality score
A higher-quality score has a direct correlation since it tells Google that your keywords and ads are the best options to push out to the audience, so the reward is in the form of ‘cheaper clicks’
4. Adjust the bids based on location and devices
Ensure you get a thorough understanding in regards to the location that drives maximum traffic, devices that your target audience generally uses, or the best times in a day to drive maximum engagement. When this is done in such great detail, your costs will reduce.
5. What is the average Cost Per Click on various platforms?
There is no fixed figure here, because average cost per click will vary based on the industry you are operating in, the type of business and the networks you are advertising on.
This also changes based on how competitive your segment is, for example Financial industries, law services especially the expensive one’s, tend to have an expensive cost per click.
But the industry average for Google Adwords is $2.32 on search network
Source- t.ly/p0lF
Now let’s look at average cost per click on various platforms:
1. What is the average Cost Per Click on Instagram?
As I mentioned earlier, every platform works differently and hence there are multiple elements that will eventually determine your advertising cost on Instagram.
On Instagram your CPC also changes for various age groups, highest CPC is for the age group of 18-24, 25-34 and 34-44 year olds.
If we were to give an approximation, then the Cost Per Click on Instagram is between $0.50-$1.00.
2. What is the average Cost Per Click on Facebook?
There are no set parameters here to determine how much you will pay to advertise on Facebook, but we need to consider the following parameters to determine the average-
i) What time of the year are your advertising?
Yes, the CPC changes based on this, it’s more expensive to advertise during the holidays.
ii) Audience Selection
As mentioned earlier, the more ‘targeted’ your ad is, the better it will be to reduce your overall Cost Per Click.
iii) Ad placement
Is it automatic, or are you manually selecting the placement of your ad, this will also help in determining your Cost Per Click.
If we were to give an approximation, then the Cost Per Click on is between $0.20-$0.80.