What Is CPC?
CPC, or cost-per-click, is a metric used to measure the effectiveness of online advertising. It is calculated by dividing the advertising expenses by the number of clicks received on the ads.
This metric is important for businesses to track because it helps them to understand how much they are spending on ads in relation to how many people are clicking on them. It also gives businesses an idea of what they should be aiming for in terms of their CPC.
CPC, known by marketers as Cost Per Click, measures how much it costs business owners each time a new customer clicks their ad. But many marketers keep asking, "how many clicks can I get for my investment?"; "How many leads can I expect for my budget" and the question we are going to answer in this article: "What´s a good CPC for my industry?".
Every industry has a predetermined budget, and it can depend on the luxury of their products or how common we use them. To explain it better, the CPC for a Jewelry business is not the same for a food and beverage industry.
So many marketers may be scratching their heads, wondering what the rules behind CPC are?
You could work with us, the leading digital marketing agency to assist you in digital marketing. Many competitors in your industry will set the bid on their own ads, and you should know how much the people in your business are spending on their ads. Let us take a look at some insights and information about how you can calculate the Cost Per Click for your business.
What factors affect your CPC?
Some of the factors that make an auction competitive are:
Scarcity: This comes hand in hand with the concept of supply and demand. Depending on how you produce your product, the greater the amount of taxes you place on your marketing strategies. If your business is about luxury residences - a very elite niche and not abundant - your cost per click will be higher.
Location: Businesses located in urban areas will have higher CPCs because they are bound to be more lawyers, home services, restaurants and everything inside a big city. Because of this, a CPC in Lisbon will be more expensive than in Oporto.
Keyword: Depending on the number of competitors in your industry, the CPC can be higher or lower. Almost 97% of Google´s earnings come from Pay Per Click advertising. Wordstream made a study of the most expensive keywords on Google ads, and some of them are:
Insurance: $54.91
Loans: $44.28
Mortgage: $47.12
Attorney: $47.07
Credit: $46.06
Network choice: Some networks are cheaper than others. For example, Google Search has a reputation for being more expensive than Bing Ads and more than other display or social channels like Facebook or Google Display. While Google is the more expensive, it is also a good indicator that this platform is the best to convert new customers.
CTR: If your ads are popular enough, Google or Facebook will reward you with lower CPC. This is not just because you are a good advertiser, but because they earn more money with your successful ads.
Why Is CPC Important?
You might be wondering, why is CPC important? CPC, or cost-per-click, is a metric that measures how much you're spending on clicks relative to your total ad budget. In other words, it tells you how much you're paying for each click on your ad.
This metric is important because it can help you gage the effectiveness of your ad campaigns. If your CPC is high, that means you're paying a lot for each click on your ad. This could be an indication that your ads are not resonating with your target audience or that you need to change your targeting strategy.
Conversely, if your CPC is low, that means you're getting a lot of clicks for your money. This could be an indication that you need to increase your budget or adjust your targeting strategy to reach a more targeted audience.
Determine your ROI
Your optimal cost per click can be determined by your target Return on Investment. Most businesses can see a 5:1 revenue to ad ratio as a good deal. Basically, you get 5 dollars for every dollar you spent. This can be expressed as a 20% cost per acquisition.
If your 5:1 revenue to ad spend ratio is too high, you can try cross-selling to existing customers. This is done by selling different products and services to an existing customer you have often seen going to your business.
How to calculate your CPC?
According to Google Ads Help, an average CPC is calculated by dividing the total cost of your clicks by the total number of clicks. So, if your ad gets 2 clicks, each costing $0.20 and one costing $0.40, the total cost should be $0.60. Then you should divide $0.60, which is your total cost, by 2, that is your total number of clicks, with an average CPC of $0,30.
Your average Cost Per Click value is usually based on your actual CPC, which is the amount you are charged for a click on your ad. This value can be different than your maximum cost-per-click (max. CPC), which is the highest price you are willing to pay for a click.
How price affect your CPC?
Any company looking to advertise on search engines should know that the price o their product and services is the number one contributor to the cost per click.
Online ad platforms are auction-based. This means that advertisers determine how much they will pay for every click; obviously, those who are willing to pay more will get their ads shown higher on every page and newsfeed.
If your product is more expensive, more competitors on your market will want to pay even more for every click. Let´s take an example. If you sell a product of $20.000 and your sales team converts one customer out of 200 clicks, you should risk investing $20 per click on your ad. This will be resulting in paying $4.000 on your ad to receive 20.000 dollars on your sales, a 5:1 ratio.
If your company sells less expensive products, you don't have the force to do expensive advertising. If your products sell for 200 dollars and convert 1 customer for every fifty, your target CPC should be $80. With 50 clicks at 80 dollars, you can generate one sale of $200, so your 40 dollar investment will achieve the 5:1 ratio.
To help calculate your target cost-per-click, use the following formula:
Target Cost Per Click = (Revenue Generated per Sale x Your Website Conversion Rate) x 20%
What Is a Good CPC for My Industry?
When it comes to setting a CPC, you need to consider what's a good price for your industry. For example, if you're in the insurance industry, you'll likely want to set a higher CPC than if you're in the travel industry.
Likewise, you'll also want to take into account your target audience. If your product is aimed at luxury consumers, you can afford to charge more for your clicks than if you're targeting budget-conscious consumers.
Ultimately, it's up to you to decide what's a good CPC for your business. But by understanding your industry and your target market, you'll be able to make an informed decision that will help you achieve your marketing goals.
How to Find the CPC for My Industry?
There's no one-size-fits-all answer to this question, as the CPC you should aim for will vary depending on your industry. However, there are a few methods you can use to find out what's a good CPC for your specific field.
The first thing you can do is look at industry averages. Take a look at some of the top paid keywords in your field and see how much advertisers are paying per click. This will give you a rough idea of the range you should be targeting.
Another way to find out is to use a tool like Google AdWords' Keyword Planner. This tool allows you to see how much traffic a certain keyword receives, as well as how much advertisers are paying for it. This can be a great way to find high-traffic keywords that have a low CPC, so you know what to target in your ads.
CPC for your Industry
Let´s find out what an average CPC could be for your specific business industry. This is based on an Envoca article.
Food and Beverage industry
Bars: In the United States, its average is $2.07
Coffee shops: The average CPC for coffee shops is $1.59. This is 32% below than other industries across all industries
Restaurants: In the United States, anything lower than $2.12 is considered a good CPC. Nevertheless, more luxury restaurants can see greater competition with CPC and higher costs in their keywords.
Food trucks: These are the cheapest business with a CPC of $0.64
Retail Industry
Auto dealership: If your average CPC is below $1.72, you are at a good price. Now, in other markets like an auto mall, your value can be much higher since this niche is highly competitive.
Jewelry stores: The average CPC in Google Ads for this kind of business is $1.19
B2B: For this sector, a good CPC is $3.33
Ecommerce: The average CPC is $1.16
Consumer and Professional services industry
Law firms: This may be the sector with the most discrepancies with the CPC average. While the most common cost is $6.75, searches for cases that can be yield seven-figure settlements will have a lot more bidders to drive up the price. "Auto accident lawyers" and "medical malpractice attorneys" can have a CPC of $200.
Travel and Hospitality: The average CPC is $1.53
Accountants, tax professionals, wealth managers and financial advisors: The financial industry sees an average CPC of $5.48.
Auto Insurance: The average of this industry is $5.19. It is good to mention that Insurance is one of the most competitive sectors in Google Ads, so if you are trying to be in the first place of Google Search, you have to pay up to $76.54
Barbershops: In the US, CPC is $0,49
Health and Medical: The medical industry has a CPC of $2.32, although cosmetic services can be higher on their prices.
Dentist: The orthodontists see a higher CPC upon all the other health services with $5.34. Like we saw with cosmetic services, these fields of health services experience a much higher cost per click on keywords like "teeth whitening," while dentist searches can be out to $2.78
School and education: Education institutions have an average CPC of $3.25. With the increasing popularity of online education, due to the COVID-19 pandemic, the average cost for this keyword can be up to $34.36. Traditional schools and colleges have an average of between $1.50-$2.50
Photographers: For photographers, anything below $2.73 can be seen as a good cost per click.
Real state: This industry has a CPC of $2.37 in the United States, being 10% cheaper than the average CPC for all industries
Technology: The average CPC for this industry is $2.09
Employment services: The average CPC for this industry is $2.04
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