It has become increasingly difficult to attract good quality (and quantity) leads, and part of the reason for this is due to cost-per-click (CPC) inflation… According to Statista:
The average monthly cost-per-click (CPC) in Google Ads search advertising for the insurance industry in the United Kingdom (UK) reached 6.94 U.S. dollars and was the highest among the presented industries.
CPC is the result of an auction algorithm that uses multiple variables to determine where ads are placed, and how much is paid through factors such as:
Quality score Competition Bidding strategy Targeting What is CPC inflation? CPC inflation is the gradual increase of average cost-per-click over time when other variables appear to be the same. Which means users have to spend more per-click in order to maintain average position or impression share.
There are a few reasons as to why there would be inflation, which include:
Competition As Google Ads is an auction, you would expect it to behave like one. The more parties enter into an auction, the higher bids get.
Ads are getting bigger in less space The advertising space at the top of the page is constrained due to a large number of extensions and other ad elements that now appear for many ads ranking for the top positions. However, to make matters worse the ad space available on the first page is notably more restricted compared to previous years.
What can I do about CPC inflation? CPC inflation is here to stay, but there are ways you can optimise your Ads to ensure that you make the most out of your budget.
Ad Extensions What are Google Ads extensions?
Google Ads extensions are basically what it says on the tin, they extend your ads and claim more real estate on search engine results pages (SERPs). They allow you to provide more information to a searcher and provide more impact on SERPs by being a larger size.
Ad extensions can improve your clickthrough rate (CTR) by several percentage points, other benefits include:
Improved lead quality Better ad-ranking More efficient use of your Paid Media (PPC) budget I want to take the time to focus on the third point above, ad extensions can create the opportunity for the more efficient use of your PPC budget. This is primarily due to the fact that ad extensions offer the searcher more information, and the user is more likely to click on the ad – this means that not only do you improve your CTR but also lower your CPC. For that reason, it’s a good practice to use all the extensions relevant to your business goals.
Different types of extensions include:
Location and affiliate location Show your location, a call button, and a link to your business’s page, and/or chain stores that sell your products.
Callout Extra text like “free delivery” or “24/7 customer service” can entice people to convert offline.
Sitelink This links prospects to specific pages of your website.
Structured snippet With structured snippet extensions, you can showcase valuable information to prospects by selecting a predefined header like product or service category, and listing items.
Call Encourage people to call you directly by including a number, or a button.
Price Show your prices of your products or services so that people can browse straight from the ad.
Vanity metrics We’ve discussed vanity metrics in regards to social media in a previous article, but the following quote can be applied here:
They look great, but there’s not much substance to the figures otherwise known as vanity metrics. Traditionally, they do not help you understand your own performance in a way that informs future strategies.
Vanity metrics can often cause you to make poor business decisions that don’t impact your bottom line, however focusing on the right metrics will secure profit for your business for years to come.
Two key crucially important metrics are cost per acquisition (CPA) and lifetime value:
Cost per acquisition This metric tells you how profitable your ads are, it measures the total cost of a customer completing a specific action. CPA gives you a good indication of how much it costs to get a single customer down your sales funnel, from the first touch point to conversion.
It’s important for a few reasons because it allows you to:
✅ Analyse your profitability – by comparing CPA to the lifetime value of a customer, you can determine if your campaign strategies are profitable and make necessary adjustments if they are not. It’s simple (on paper) to calculate your CPA; CPA = Campaign Cost / Conversions.
✅ Manage your budget – it gives you a clear understanding of how much is spent on acquiring a customer, enabling your company to allocate its Ads budget effectively.
Lifetime value Google states that:
Lifetime Value data is cumulative for users acquired during the acquisition date range you’re using.
Having lifetime value (LTV) scores for your customers and tying them back to the acquisition channel, campaign or keyword allows you to understand the Search as well as site behaviour of your highest value customers. These insights can then serve as fuel to shift your budgets and optimise these audiences in your campaigns to increase return on ad spend.
In addition, this means that when you have the opportunity to create remarketing campaigns you can bid higher or lower and tailor your creatives depending on the customer’s value.
Keywords Once you have launched a Google Ads campaign, one of the first things to do is to target specific keywords. Instead of targeting one or two words, long-tail keywords (usually three to five words long) have a higher value than their shorter counterparts – this is due to the likelihood of finding users with a more specific search intent.
It’s all about the relevancy to the end user.
While search volume may be lower, the conversion is of a higher calibre; you will more than likely increase quality with long-tail than high volume keywords. In addition, your long-tail keyword strategy may result in less competitors for that particular ad space.
You can find your long-tail keywords by using Google’s keyword planner, it can provide you with a list of keywords that have low competition and high search volume… but is this enough?
In short, no.
Another way to capture long tail keyword ideas is to have broad match keywords running, and then mine the Search Term report.
The search terms report is a list of search terms that a significant number of people have used, and that resulted in your ad being shown. Depending on your keyword matching options, the search terms listed might be different from your keyword list.
Artificial Intelligence (AI) It’s hard to talk about optimising Google Ad spend without addressing AI, but it does bring multiple benefits… including lowering your CPC!
Adjust bids autonomously You can use AI to adjust bids autonomously, doing this will ensure you won’t bid too low for ads that enable you to acquire quality leads, and you will also improve your ROI by eliminating overbidding.
Pause Ads with poor performance Continuously bidding on Ads with poor performance isn’t recommended as it won’t deliver the desired ROI. Instead of wasting time (and money), you can set up parameters and automated rules that will pause underperforming Ads.
Predict consumer behaviour Machine learning is making rapid headway in the industry, and AI algorithms can learn from historical data, taking into account your audience’s demographics, purchase habits, web activity, and device usage… to name a few! Algorithms can detect connections between your campaigns and keywords meaning that they can predict what search queries will generate probable conversions.
Final thoughts Paid search is responsible for 28% of ad spend globally, and in 2022 CPC inflation was at a very high 15%. Optimising your Ads to get the most out of your budget, starting with the above, is a great way to keep costs down – but you can always contact us for the rest!