Paid Search Marketing

Five Ways to Lower Your PPC Campaign's Cost Per Action (CPA)

By Tom Demers May 02, 2011 Posted In: Paid Search Marketing Comments: 4

Last week we gave you five tips on how to get more leads from PPC. But what if your main problem isn’t leads? Everyone wants more leads, of course, but what if your most immediate problem is that your PPC campaign just isn’t profitable?

In this post we’ll walk through five more tips, this time for lowering your CPA.

Cost Per Action Lowering Tip 1: Lower Your Bids

If your cost per conversion is out of whack, this basically means that the following equation isn’t adding up properly for you:

Cost / Conversions = CPA

We’re thinking about ways to get conversions for cheaper, so it’s pretty obvious that we might want to do something about the conversion end of this equation, but all too often I see people ignore the cost side to their own peril.

Many times, there’s a range of conversion that you can expect from your site. You can always work to improve conversion rates, but if your site’s traffic from SEO and your historical PPC traffic converts at a pretty steady rate and you don’t have the resources to do a lot of conversion optimization, you may be looking at something like this:

($5/click * 10 clicks) *.05 = $2.5 CPA

The .05 represents our conversion rate – 5%. If our target CPA is $1, and the conversion rate on our site is 5% we just can’t support $5 a click. This seems pretty straightforward and obvious, but the reality is it’s a calculation a lot of advertisers just don’t do before they jump into conversion optimization efforts. Understand what your conversion rate is and what your CPA is, and know what you can comfortably pay for each click, on average, to make your account or a segment of your account profitable.

Cost Per Action Lowering Tip 2: Find More Specific Keywords to Target

In the last post we pointed you to a keyword expansion guide and another post on how to expand your keyword list and called out keyword research and expansion as a means for generating more leads – expanding and refining your keyword list can also help you to lower your CPA.

A great means of lowering your CPA can be to kill off or lower bids on “head” or shorter terms and find more specific keywords from methods like:

Cost Per Action Tip 3: Increase Quality Score

In our list of methods for increasing lead volume, we recommended:

Better Campaign Structures – In addition to just tweaking your ads, you can also break down your paid search campaigns to create tighter, more relevant keyword groups, which will help enhance the effectiveness (and clickability) of your ad.

This increased clickability and improved relevance will lead to increases in Quality Score – that means a pricing discount and lower costs per click and per conversion. To get an idea of where the weaknesses in your account’s Quality Scores lie you can leverage the spreadsheet in the free Quality Score Toolkit.

 

Quality Score

 

Cost Per Action Tip 4: Analyze Your Offer Types

Again this is a similar tip with a different twist to our advice around drive more leads: here you want to look at your offer strategy with an eye towards inefficiencies.

If you’re offering a white paper download, it may look from the equation mentioned earlier that you’re doing OK within this campaign – you’re converting at what you’ve deemed to be an acceptable level. But you need to make sure that you’re converting at an acceptable rate to sale. How do white paper downloaders convert to actual paying customers? Again it seems obvious, but many businesses don’t have a strong handle on this number.

You can also take different types of traffic that isn’t converting profitably and test pushing it to a different offer, as we suggested in the first post, as creating new leads may not only get you more leads, but can also drive down your CPA (more leads for the same price!).

A Final Cost Per Action Tip: Qualify with Your Ad Text

Good click-through rates are great and can drive more traffic, but a great way to lower CPAs is to analyze your existing ad text to look for ads that are driving too much of the wrong traffic. Find ads that have a high CPA and think about the messaging – are you being too vague? Could a more specific ad that includes more details (price, the type of product, etc.) and better syncs with your landing page ensure that you have fewer stray clicks and better conversion rates? If so you might have an opportunity to qualify out bad clicks and improve your cost per acquisition.

Cost Per Action Bonus Tip: Optimize for Conversions!

And of course: just like with optimizing for more leads, a great way to lower your cost per action is to increase your conversion rate from the equation above.

AdWords Performance Grader




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Comments

Monday May 02, 2011

Daily Digest for May 2nd | A Blog by John A. Lee (not verified) Said:

[...] @WordStream: NEW Post: Five Ways to Lower Your PPC Campaign’s Cost Per Action http://www.wordstream.com/node/1765 [...]

Friday May 06, 2011

ClickSweeper Blog » Weekly PPC Round-up 5/6 (not verified) Said:

[...] Tom Demers over at Wordstream gives us five ways to lower CPA. No, not your tax person — your cost per action. We love Tom’s straightforward approach [...]

Friday May 20, 2011

Christian Waijers (not verified) Said:

Is it me or doesn't the CPA calculation in the first example and my mail) add up? "($5/click * 10 clicks) *.05 = $2.5 CPA" -> With 10 clicks and a 5% converstion rate you'd have 1/2 conversion for that $50 bucks spent, which means a whole conversion costs $100 (CPA).

Wednesday February 29, 2012

Splice Marketing Ltd (not verified) Said:

You do really need to do all these things at once - just getting more traffic is no use if they are the wrong sortt of visitors, or if the landing pagedoes not appeal to them.

As well as looking at your campaign, pay attentino to landing pages and terms that are not converting so these can be improved or removed.

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