Cost per Click (CPC): everything you need to know

When starting a new project on the internet, a website, for example, one of the first concerns is how to give it visibility.

This is where digital ad campaigns come in, with various applications and results.

They have the potential of boosting sales or promoting an action, product or service quickly.

But where does CPC come in? What is CPC, in fact?

Cost-per-click (CPC) is a metric related to paid-media campaigns, which indicates the cost per each click on your ad. It’s what tells you if investing in an ad format on the internet is worth it.

Obviously, paid campaigns mean investing money; and entrepreneurs want to optimize their investments as much as possible in order to have the best possible results on the actions.

Therefore, it’s important to know these strategies, especially for new digital entrepreneurs. In this post, we’ll help you understand more about CPC.

What is CPC, and what is the difference between CPM and CPA?

You already know what CPC is: the amount charged per user click on an ad on the internet.

Generally, the main goal of campaigns is to generate traffic to your website. In other words, if you’re the advertiser, you pay for each click on your ad in another website that directs visitors to your own website. But you can also make money with a blog.

CPC is different from other strategies also widely used in digital marketing, such as Cost-Per-Mille (CPM) and Cost-Per-Acquisition (CPA).

CPM is an amount charged for every one thousand impressions of an ad on a website. In other words, for every one thousand appearances or views of the campaign on a page, the advertiser pays an amount.

This metric is widely used by brands to convey a specific message, in a brand campaign for example. It uses the audience to display the brand.

What’s interesting about this type of ad is that you work with a forecast of amounts. On the other hand, you may lose users, who cannot click on these ads.

On the other hand, CPA is much more specific because advertisers only pay after visitors who complete the final desired action; in other words, when they purchase the product or service from the advertised website.

It’s a more useful format for those who already have high-profit rates in their products, because the price of this ad is usually more expensive. It’s also used in more aggressive campaigns that are focused on conversion.

If you have started advertising now and wish to generate traffic on your page, knowing the concept of what is CPC is most recommended. And this is why you need to continue reading this post.

How do you calculate the CPC?

If you are considering a campaign to generate traffic, you might be wondering about the maximum amount you should pay for a click that leads to your website.

Well, now that you know what is cpc, keep in mind that this amount can be calculated in a simple manner by dividing the amount invested by the number of clicks.

But this isn’t the best way to calculate it, since a click doesn’t automatically mean a sale.

Therefore, you should take into account all the factors involved in order to obtain a more precise amount capable of generating greater profits. And what is it?

The maximum CPC. Take it easy! We’ll explain it all.

First of all, we need to keep in mind the gross profit per order, your website’s conversion rate and the frequency of visitors considered satisfactory in the given period.

In order to calculate the gross profit, just subtract the cost of the items to be sold from the total sales amount.

The equation is:  Sales – Cost of Goods = Gross Profit

In practice, if you intend to sell a beverage kit for 35 USD and the production cost is 20 USD; your gross profit is 15 USD. Easy, right?

This is the amount that must be multiplied by the conversion rate. You’re probably asking yourself, “But, what is this rate?”

Well, the conversion rate can be found by dividing the number of sales made during a period by the number of visitors during the same period.

If your website made 20 sales for every 2,000 visitors, your conversion rate is 0.01, i.e., 1%.

In other words, on average you need at least 100 visitors to make a sale.

Now the maximum CPC can be calculated:

Maximum CPC = Gross Profit x Conversion rate.

In our previous example, this amount would be obtained by calculating 15 x 0.01, which would be 0.15. In other words, each click could cost a maximum of 15 cents.

Building the campaign

In the case of ads in this format, a few issues must be considered before putting them in practice.

By observing these details, you can create a campaign that speaks more to your target audience and is much more efficient for your company’s earnings.

Check out a few tips we’ve set aside for you:

1. Target meticulously

Study your persona well and the audience of the pages where you wish to run your ads. They should speak to each other to avoid unnecessary flow to your website.

In addition, by talking to an audience in the right place, you can generate a better connection and interest them and consequently, increase your conversions.

And this is also why your strategies and goals must be well defined. This will ensure an effective analysis of your campaigns development.

When targeting, you should consider the following:

• The platforms that will be used;
• The devices users access;
• Age group;
• Gender;
• Tastes;
• Location;
• Interests.

The more directed, the greater the chance to reach those who are in fact interested in your brand and products, thus allowing conversions into purchases.

2. Test different campaigns for the same keyword

Carefully search for keywords that can be used in the ad.

Using them well results in the effectiveness and optimization of the campaigns.

And you can, and should, test different campaigns, models and colors for the same keyword.

There are tools that can help you find the best keywords, but more than this, you need to know precisely what your goals with the campaign are.

This way you can identify the best way to speak to your audience, assess what is more attractive for them and which combinations have generated more engagements and results.

Remember to record all the tests so that afterwards, you can analyze which one makes more sense for your business.

3. Monitor carefully

Analysis and monitoring are important in all campaign creation steps.

Use your own tools and also your notes and impressions.

Frequently evaluate your campaign’s performance, remembering that any positive and negative indicators are learning and starting points for other actions.

Make changes whenever necessary, this way you’ll also be able to assess what is effective or not.

These are direct strategies, so they must always follow your business’ reality, with the possibility of metrics being one of the main advantages of this model.

The results analyzed here will serve as the basis for the next campaign creations and decision-making process.

4. Keep the audience on your website

Thinking about conversion strategies within your own website is very important.

The page with the ad will be the gateway for many visitors to become future customers. So it must contain elements focused on the high retention of flow to the website.

There’s no use in leading people to it if it’s not attractive enough to a point where they don’t wish to continue with their purchase.

This is one of the actions that can bring the most return on your investment.

After all, increasing the possibility of a positive experience for the audience on your website will easily make them feel more interested in other items other than those used in the promotion.

A page with clear messages, good visibility and browsability, with a dynamic and intuitive layout, makes all the difference.

Invest in platforms and optimization techniques to ensure your success online.

Conclusion

Paid ads on the internet are a dynamic and effective alternative, especially for those who are starting their digital career.

And they can be used and priced in several ways, according to the goals that the advertisers wish to achieve.

In addition, they provide a more specific targeting than traditional media, as well as a greater possibility of monitoring and evaluating the results.

Investing in paid media can provide benefits rather quickly, since they rely on well-focused strategies.

But it is essential that you be up-to-date and understand more about the platforms and actions to reduce losses and increase the performance of your campaigns. Therefore, it’s important to understand what is CPC, on top of several other terms related to paid traffic.

If you are interested in this model and wish to learn more about other paid media strategies, we have a great article about how to buy traffic. Be sure to check it out!