The pay-per-click landscape has become so saturated that only the most analytical marketers are able to continuously turn a profit from their paid search, display and social campaigns.
Data-driven marketers who are able to effectively manage PPC campaigns to a target cost per conversion (a.k.a. cost per lead) will continue to see campaigns with a predictable, repeatable profit margin.
Everybody else is most likely paying too much to acquire customers.
As it stands, this means that more sophisticated and aggressive PPC marketers will eventually find the “ceiling” price for a click and will be forced to find operational efficiencies and higher conversion rates to improve their margins. Less savvy PPC marketers will be forced to find cheaper, less qualified traffic sources or get out of the PPC game altogether.
The most important metrics for PPC marketers
Cost per click (CPC) and conversion rate (CR) are the two most important factors for improving the cost per conversion. The problem is, they are independent variables and don’t always move in unison.
As costs per click rise, cost per conversion will also rise assuming conversion rate stays constant. Therefore,
marketers that focus on optimizing for lower CPCs and/or higher conversion rates will consistently achieve better results and remain competitive.
Should you focus on improving cost per click or conversion rate?
Ideally, both! But knowing how to set the right expectations and manage your time is a bit trickier. Our clients typically understand the relationships between these three variables but sometimes the details get a little murky when combined with all the other PPC metrics that matter to campaign performance.
At Workshop Digital, we built this simple but powerful calculator to help our teams understand and explain the relationship between cost per click, conversion rate and cost per conversion:
Click to view the calculator (and read on to learn how to use it).
Our clients love it and we’re offering it up today to help you prioritize your time to achieve a target cost per lead for your PPC campaigns. As I mention in the video below, the calculator is a great way to determine where to focus your optimization efforts (whether that be in improving your ads or the conversion rate on your landing pages).
Video: See how to use the cost per lead calculator
Focus on the right metrics to beat the competition
PPC marketers often become enamored with surface-level metrics like click-through rate, average position or Quality Score. These data points are helpful in the right contexts but they don’t directly impact cost per conversion.
If you don’t focus on improving your cost per conversion with smart bidding and conversion rate optimization, ultimately you risk losing customers to your more efficient, conversion-focused competitors. Grab the calculator and run your ideal vs. current numbers today.