Metric of the month No 6 – Cost per click

Cost per click. (CPC) is another one of those pesky metrics that can be absolutely crucial to your trading strategy but once again, it’s one that can lead you into trouble if it’s not considered alongside a whole bunch of other performance indicators.

To go back to very basics and to try and sum up one of the world’s biggest and quickest evolving industries in one sentence…. Internet traffic comes in two types – the traffic you pay for directly and the traffic that comes for free. Except none of it comes for free. Bear with me on this one and apologies to all of the brilliant minds that work in the field of search engine marketing.

The paid for traffic comes from those adverts you see when you enter any search on any search engine. They are frequently cunningly designed to not look like adverts. Remember that despite all of their PR efforts, search engines are there to make money – not to provide a public service! Never forget this.

The genius behind the search engines business model is that they provide a service free to the consumer, but charge companies to get their names in front of potential customers. In particular, customers who are happy to surrender extremely valuable insights about their intentions, in exchange for relevant useful information.

Let’s say that your company makes and sells left handed blue widgets. If a customer types “left handed blue widgets” into a search engine, surely you want to be visible to them and to get them onto your website? You can enter the auction for this traffic by determining how much you would pay for every person that clicks on your advert. You set the maximum price per click and the maximum budget for any given time period. You can even set rules that mean you will not be visible to people searching for right handed blue widgets, or left handed green widgets. Such highly targeted marketing is the stuff of dreams!

The tighter you define your campaign the more efficient your campaign will be and potentially the lower your Cost Per Click (We got there eventually)

Health Warning

I’m frequently asked what is a good CPC. This is impossible to answer without much more context.

The cost per click is just part of the story. Your CPC metric tells you how much it costs to get an interested customer onto your website. You need to know how likely they are to go on to make a purchase with you, how likely are they to repurchase and what is their likely lifetime value.

You therefore end up with a huge range in your CPC – from pennies to many pounds, all of which may be profitable, or could also be money leaking out of your marketing budget.

Joe’s advice

Setting up a paid search campaign is relatively straightforward and can open up huge opportunities for most organisations. It can also become an incredibly complex, expensive and all consuming industry where having the right expertise to hand is crucial.

Proceed with caution and when your marketing team presents their CPC data – make sure it’s amongst all of the other information you need to make the right decisions.

You should also expect to be shown the Click Through Rate, (CTR – the number of people that having seen your advert, click through to your website), the Conversion Rate (CVR – the proportion of people on your site that make a purchase) and the Average Order Value (AOV-how much each purchaser spends with you). 

As ever, if you want any help, or would like someone to review your current campaigns, or plans for new one – please get in touch with Joe at Joe Lynch Consulting