The term ‘cost-per-click’ represents the cost to the advertiser every single time that someone clicks on their ad. Most online ad platforms necessitate a target cost-per-click for new campaigns to run. This begs the question of, “what is a good cost-per-click?”
A “click” that occurs on one of your PPC text advertisements or display banner advertisements represents a visit, or an interaction with your organisation’s product or service offering. Every click in a PPC campaign represents attention from a person who is looking for something which you offer.
This attention is what you’re purchasing, as an advertiser, so it’s incredibly important to note two factors:
- What type of attention you’re going after, and
- How much you’re paying for it.
Unfortunately, there isn’t one cookie-cutter response to the question of what is a good cost per click rate. This is because there are a number of different factors which will influence it. These factors can include such things as the platform that you are using, and the type of advertising employed.
Beyond that, there is also an aspect about which audience you are trying to appeal to as well as the product or service which you are advertising. Even the strategy behind your bidding can have an effect, as will the price of the item being advertised.
What Is Your Target ROI?
Your best cost-per-click will be established by your target ROI, or return-on-investment. For most companies, a 5:1 revenue-to-ad ratio is considered acceptable. This means for every rand spent in advertising, five rand in revenue is produced. A 20% cost-per-acquisition, or CPA, is also a way of expressing this ratio.
What Is The Impact Of Price On CPC?
If a 5:1 revenue to advertising spend ratio is far too expensive, make use of these methods in order to cross-sell active customers online. This will boost average customer value, which in turn increases how much you are able to spend on acquiring a new customer.
For those who advertise on search engines, the product or service that is being advertised is the single greatest contributor to cost-per-click. Most online advertising platforms are auction-based. Advertisers control how much they’re ready to pay for each click. Those advertisers who are ready to pay more will get their ads shown higher on the page or are more likely to be displayed in a newsfeed.
The more expensive that your product or service us, the more your competitors will be willing to pay for the click. For instance, if you sell a R20 000 product, and your site and sales team can convert one out of every 200 advert clicks into a sale (a .5% conversion rate), you should be ready to pay R20 per click on your ad. This results in paying R4 000 in advertising costs in order to acquire a R20 000 sale (there’s that 5:1 ratio mentioned earlier).
Want to learn more about pay-per-click advertising? If you do then you need to do our PPC and Web Analytics Course. Find out more here.
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