What is Pay Per Click ROI?
Pay per click also known as PPC is essentially a form of advertising or an advertising model.
You pay a service like Google to display your ad on their search engine result page, and if it gets clicked you pay the provider (in this case Google).
But PPC CPA (cost per acquisition) is also a well known KPI that measures how much each click or conversion is worth and how much you’re paying for each click or conversion on paid marketing platform.
CPA essentially helps you measure your ROI in a PPC campaign. You can work out your CPA here.
To easily work out your ROI and CPA just fill out the number of clicks, conversion rate, cost per click and average order value below!
This will then give you how much you’ve spent, how much revenue you’ve generated and how much of a return you’ve made.
How to work out PPC ROI
Calculating the cost per click is actually quite simple, almost as simple as using our calculator.
So here’s the formula:
This will give you the ROI of your ppc campaign, to find out the percentage you have to multiply the answer by 100.
Why is it important to measure CPA
Cost per acquisition is very important because of its very nature. CPA is essentially all about measuring your ROI in terms of conversions. It helps you know when your marketing is bringing a positive ROI.
We can use CPC for other purposes. Let’s say you got 900 clicks and 500 conversions. The average order value of the products advertised within the campaign is $4.50. However, your cost per click was $7.00.
Overall you’d have spent $6,300 but only made $2,250 in revenue.
To work out the ROI percentage we would need to work out the following (2,250-6,300)/6,300*100 = -64.20%
Whilst you would have had a huge number of conversions, you’d be operating at a major loss, because of this it is important to monitor, measure and optimise your CPA.
There is no exact benchmark for CPA as they vary for everyone depending on a number of factors, here is a list of industry benchmarks you can use as a guide:
How to decrease CPA
Optimising your CPA can have a number of benefits, for example having a lower CPA increases the overall profit from your adwords campaign.
A healthy adwords account consists of a well lower and well optimised CPA. A well optimised CPA is a cpa that’s constantly being monitored and worked on.
It’s being kept as low as possible at all times without affecting conversions too much or preferably not at all.
Lowering your CPA also lets you spread budget over different campaigns and focus on more areas to advertise on.
One great way to reduce your CPA is to switch your bidding from automated to manual. Automated bidding is quite useful if you’re just dipping your toes.
But it doesn’t always work, and because of this it can often lead to a higher CPA.
If you switch to manual bidding you’re able to adjust bids to specific keywords and set specific daily budgets on campaigns.
This gives you the opportunity to experiment with what budgets and bids that work well whilst keeping your CPA lower.
It also lets you be more reflective and adaptive with specific changes you make to your campaign.
To start with, identify your starting CPA.
From there you monitor the keywords that are and were performing well using historical data and increase their bids, this will improve their SERP position and in turn help you generate more sales.
If this doesn’t bring in sales you should look at your landing pages and customer journey behaviour to see where customers have been dropping off, or try reducing your bids.
You can do this by checking the behaviour tab on Google Analytics
If there isn’t a particular page where customers are dropping off the keywords you’ve selected may need to be changed or removed.
The next step optimising your CPA is to reduce the keywords that were bringing in impressions but didn’t lead to conversions.
Adjust Bids Based on Devices and Locations
A very good way to reduce your CPA is to take a look at your Dimensions tab in Adwords, this view lets you look at the type of devices, the time and the locations where your ad received clicks and conversions.
Looking at this you should make note of the locations and devices that convert well and even look at times where you’ve gotten the most conversions.
You can take a look at the best and worst devices, locations and even times of days.
Now you may be wondering what the point in all of this is? The reason we are doing this is so we can use bid modifiers.
This will let us increase bids when certain criteria are met. Let’s say most of your conversions come from 12pm Friday on IPhones, you can in turn set a number of modifiers that make it so your bids increase when a user is searching on Friday at 12pm and are on an iPhone to make sure you capture those extra conversions.
This also means you can set modifiers that reduce bids on certain times day and location, such as a Monday morning when everyone’s more focused on their schedule for the week.
Accurately using these will help you to reduce your cost per click significantly.
Negative Keyword Mining
Negative keywords are very important, especially if you’re using any match types that aren’t exact match.
You should fit negative keyword mining into your routine somewhere, whether this be at the end of the week or once a day.
Negative keyword mining is the process of adding keywords to that you don’t want your ads showing up for.
This essentially saves you from spending money on unnecessary search terms that will have no chance of converting.
An example being if you had a broad match keyword buy leather bags, you wouldn’t want google displaying your ad for the search term: buy raw leather.
CPA is one of the most important adwords KPIs that can help you measure your ROI. Optimising your CPA can make a big difference on how your adwords performs.
Remember to keep adjusting your bids depending on how keywords are performing over time and to add keywords to your negative keyword list.