Cost per click (CPC) & cost per mille (CPM)

In search engine marketing, the most common pricing models are CPM and CPC. CPC shows how much it costs to buy a click on your advertisement. CPM indicates the cost per thousand impressions. When deciding on the pricing model to use, consider what you want to accomplish with your ad. For example, if you want to get the word out and gain brand awareness, go for CPM because you will definitely get 1000 impressions. The downside to this is that impressions only mean that people (in the best case) see your ad. It does not mean they click on it. Instead, it might be more advisable to use the CPC model to drive your conversions. That way, you only pay for the ad if people click on it.

The cost of a click depends on your maximum bid, your quality score, and the competition for the keyword you are using. It is crucial to regularly monitor your CPC because costs can add up quickly without giving you the return you are looking for. When you are overpaying, you will soon run out of marketing budget with no return, and worst case, no valuable insights. Keep in mind that what you are looking for are not cheap clicks but affordable traffic with a reasonable conversion rate. Therefore, your success is determined by how much you pay for a click as well as the traffic quality (people who click on the ad).

No matter which pricing model you choose, always track your campaigns to see which design and messaging work best. Test, remove the losers and focus on the winners.

How to calculate CPC

Your average cost-per-click is calculated by dividing the total cost of your clicks by the total number of clicks.

Average cost-per-click = Total cost of your clicks / Total number of clicks.

For example, if you get 2 clicks on your ad, one costs €1 and the other costs €3, the total costs are €4. Now you divide the total cost €4 by the number of clicks and get an average cost-per-click of €2. (€4 / 2 clicks = €2)

How to improve CPC

• Improve your quality score (test your design and wording, and remove the losers)
• Chose a niche topic, rather than high competitive keywords
• Use negative Keywords
• Test different ad positions
• Lower your bids
• Adjust bids by devices or locations

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