Before discussing how to lower Cost-Per-Click (CPC) on Google Adwords, figure out how much Google Adwords will cost for your campaign.

Pay-Per-Click veterans probably do not need an answer to this question. However,  if you are someone interested in Google Adwords, the following information will enlighten you. Google figures out how much an advertiser should pay and whether or not that price is within your budget.

Many variables are taken into account to determine the CPC of any given keyword. The main variables are the ones that constitute the final price of each keyword. Therefore briefly touch upon before trying to figure out the actual cost of a particular keyword or group of keywords.

 

Determining CPC: All The Variables

The average CPC for Google Ads is around $1 and $2, with their Display Network averaging slightly under $1. Now, it all depends on how the variables that affect an advertiser’s CPC.

One such variable is the industry in which you are a part of. Keywords about particular industries have different CPC’s associated with them. Again, the average CPC for each sector is not necessarily going to be the final price you are going to pay for the keyword. However, it does give some general concept as to how much you can expect to pay by choosing one of them.

The other variables which determine an advertisers final CPC price can be found in the following equation: AD Rank = CPC + Quality Score

Google works on a bidding auction strategy whose sole purpose is to find out where to place the ad (on the top, near the bottom, on the first page, or not to show it at all). This is called the Ad Rank.

Ad Rank is comprised of how much you are willing to bid on a keyword (Max Bid or Max CPC). This also includes the relevancy of your ad and landing pages to that keyword. The higher you want your ad to rank, the more you will have to spend.

*Important Note: Google rewards high CTRs with lower CPC’s. So, even if you begin by paying a certain price, you might end up paying a lower CPC if your CTR improves throughout the campaign.

Another simple way in which to explain how Google prices a keyword is with the following equation: Your Price = Ad Rank of Person Below You / Your Quality Score + $0.01

 

How Much Can You Pay For Each Click

This is the deciding factor in choosing whether to run a Google PPC campaign or not. Figuring out how much you can “afford” to pay is not that difficult to figure out if you know a couple of data points. The biggest one being your Earnings-Per-Click. Your Earnings-Per-Click (EPC) will ultimately decide whether your Cost-Per-Click (CPC) is worth it.

If you know that you make $3 on average for every click you pay, then you can afford to pay $3 for a click without running into a loss. The challenge comes in figuring out how much you make for every visitor who comes to your site. In other words, how much is each visitor worth?

To determine this, you have to factor in the price of what you are selling plus the conversion rate of your site.

Here is an example:

You are selling an item with a profit margin of $100. You know that your website produces a 5% conversion rate (out of every 20 visitors to your site, at least 1 buys this product). Then, you divide 20 visitors (or clicks) by $100 to come up with $5 EPC.

Now you know you can spend up to $5 for a click unless you are sure you can improve your Quality Score during the campaign to bring that number down.

 

Collect Reviews To Improve Your Quality Score & Lower Your CPC

Studies have shown that over 70% of online customers read reviews before making a purchase. Therefore, it is crucial for a company to gather and display the reviews during their organic and paid advertising campaigns.

Google allows advertisers to promote Google Seller & Product Ratings on all Adwords campaigns. Therefore, this has a substantial impact on lowering CPC. Google has stated that displaying star ratings on ads can increase CTR by 17%, thus raising the overall Quality Score and lowering CPC.

 

Conclusion

In the end, all paid marketing channels are going to cost money. The main takeaway here is that as long as you know or can come pretty close to figuring out your EPC. Then, all you have to do is search for the keywords that are most relevant to your product or service. See how much their average CPC is. Compare the two and see if you are in the ballpark.

Remember, you can always make the numbers work for you by getting higher CTR’s through relevant ads and landing pages and by using product and seller ratings.

Google Adwords does have the highest CPC’s in general out of all the other major and minor PPC platforms. However, they have the highest quality leads. Their entire platform is based on intent and the ability to target customer intent brings higher conversions. There is no problem in paying more if you can make more by doing so.

Head of Fulfillment
Samir’s wall-street background lends itself well to the long hours and streneous tasks of managing our vast fulfillment team in order to garner amazing results and maintain the excellent work quality our clients have come to expect from Kobe Digital. His background in data analysis helps guide our philosophy in campaign optimization.