A common question or concern of our clients often surrounds the topic of cost-per-click (CPC) for Google ad campaigns. “Why is our CPC going up?” or “How do we reduce our CPC?” are common questions. Explaining and outlining that CPC is important - to an extent - is often a task we have.
Here I’ll breakdown and dissect CPC, and its overall importance and lack thereof in a strong Google Ads campaign.
Why CPC does matter (somewhat):
The major reason why CPC matters is it’s a direct reflection of your campaign’s Quality Score. A quick refresher: Quality Score is arguably the most important driver of a strong Google Ads account - and it’s composed of three components - expected click-through rate (CTR), ad relevance and landing page experience. When those 3 components are strong, a campaign will have a strong Quality Score.
A strong Quality Score leads to Google giving a campaign better ad rankings, meaning there’s a better chance your ads will show up at the top of Google Ads search results, which is great.
At this stage, this is where actual CPC does matter. But many believe that once you’re in the top 3, the advertiser in the 1st position naturally paid the most, the advertiser in the 2nd position paid the 2nd most and so on. This is not necessarily the truth. An advertiser in the 2nd position could be paying far more than the CPC of the 1st position advertiser simply because the 1st position advertiser’s Quality Score is significantly higher.
In this instance, if you were the 2nd position advertiser, you understandably wouldn’t be happy paying a higher CPC than your 1st place competitor. But if you’ve followed along here, you’ll realize that your high CPC is only a symptom of the root problem - your Quality Score. Your Quality Score matters here far more than your actual CPC as it’ll solve your CPC problems.
Why CPC does not matter:
On the flipside, the case for why CPCs don’t matter has a variety of reasons. Often, it boils down to understanding buyer journeys and that some keywords are going to be more competitive than others because they simply are far more valuable to advertisers. To make this more illustrative, let’s walk through an example of a typical buyer journey and the multiple steps they often take before making a purchase/becoming a lead.
Let’s say you’re the owner of a roofing company. Maya, your prospective customer, is looking for a new roof to her house and starts doing a Google search for a local roofer. Her buyer journey might look like these steps:
- Google searches “best roofers” (1st Google search)
- Clicks on your ad and visits your site
- Your site looks good and she’s possibly interested, but realizes she really doesn’t know anything about how to choose a quality, trustworthy roofer
- She leaves your site - revisits Google and searches for “how to choose a quality roofer” (2nd Google search)
- She finds a couple different articles and YouTube videos that give her tips on how to choose a roofer including making sure that a roofer is “licensed, insured and close to home”
- She then goes back to Google and searches “Best licensed & insured roofers near me” (3rd Google search)
- She then goes to your competitor’s site, and calls them for a quote (conversion)
This is an example of the various, realistic steps a possible new customer might take and that Google, based on their analytics dominance, is often able to track. Google is able to track Maya’s website visits, then use its extensive data of past users to determine that the 1st search done by Maya has a 10% conversion rate, but that the 3rd search has a 50% conversion rate (I exclude the 2nd search because it’s not a search looking for a roofer directly - it’s a search to be educated on how to find a roofer). Based on those odds, at this point, which click would you prefer to have? Obviously the click from the 3rd search.
Now if we layer in CPC - the 1st search click may only cost $2.50 because it has a lower user intent whereas the 3rd search click may cost $10 because it has a far higher user intent ( “Best roofer” vs. “Best licensed & insured roofers near me” - the latter is more specific and coupled with the fact that it is the 2nd time Maya is doing a search for a roofer - it shows a better likelihood of someone in the decision phase and ready to convert).
If the strategy here were to go after the low CPC clicks, of course going after the 1st search that’s only $2.50/click would make more sense. But at a 10% conversion rate, that would mean you would get 1 conversion for every 10 clicks (10 * 10% = 1) and since 10 clicks would cost you $2.50 each - it would cost $25/conversion ($2.50 * 10 = $25).
The 3rd search, while it might seem scary at 4x the cost at $10/click - with a 50% conversion rate, 1 in every 2 clicks (2 * 50% = 1) would be a conversion meaning it would cost you $20/conversion ($10 * 2 = $20).
If $1,000 were spent on ads, your lower CPC focused strategy would get 40 leads and your competitor, even though they pay 4x your CPC, would get 50 leads. A huge difference.
This is why CPC is often considered to be a red herring and why when factoring in all of the metrics that are important in a healthy Google Ads campaign - CPC shouldn’t be the top reason you’re losing sleep.