digital marketing

Are You Converting? AdWords Cost per Acquisition Bidding Could Help

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Creating a dynamic SEO strategy that works is vital to visibility on the web. Each client has unique needs and goals requiring a unique approach, including pay per click advertising. One of the things I appreciate about AdWords is the range of options for managing campaigns – you can control every aspect of it, allow it to be completely automatic, or choose somewhere in between. Choosing what will work really depends on the client and their goals.

Although some clients are advertising for visibility, most are looking for conversions (a download, a request for a demo, a purchase, etc.). The campaign only has ROI if those who click can be turned into customers. Manually adjusting bids to optimize for conversions can be done, but would also take up a huge chunk of your day, every day. The Cost per Acquisition (CPA) bidding strategy in AdWords automates the process so that the budget is spent on conversions, not clicks.

What is CPA?

CPA is an automated bidding system that uses historical AdWords data to increase conversions. You can set the budget, target bid cost and, in some cases, max bid. The system then looks at all past conversions to determine which placements will most likely convert.  Ads are placed to increase conversions and avoid clicks that will not convert.

This doesn’t mean that you only pay for conversions, though. It is still pay per click but those clicks should be more likely to convert.

What factors are considered in CPA bidding?

AdWords uses all of your campaign data but there are several important factors:

  • Conversion History of Your Ad – those with higher conversion rates may be shown more often
  • Keyword Broad Match Query – how well the query matches the keyword(s) for the ad
  • User Location – the physical location of the person performing the search
  • Conversion Rates on Partner Websites – Google not only considers how your ads perform on search results but also on partner websites, both Google and non-Google

What you should know

  • CPA is Fully Automated  - you set the target CPA and budget but the rest is automated
  • 15/30 Required – you must have at least 15 conversions over the past 30 days for the ads to keep running
  • Cannot Set Cost Per Click – only max cost per conversion
  • Directly Impacted by Quality Score – the higher your quality score the lower your cost
  • Bid Limits Discouraged – bid limits are available for search network ads only and Google discourages using them and quality clicks are likely to cost more
  • CPA Will Likely Cost More than Pay Per Click– because it takes into account those which will not be likely to convert and the ad will not be shown to them
    • The average CPA across all industries is $59.18 on search network (the results page) and $60.76 on display (participating network of other websites)
    • By contrast, the average cost per click in Adwords is $2.32 for search and $0.58 for display

In the right situation, CPA can be appealing because it can bring conversions while spending budget only on those placements most likely to convert. But for many, the complete automation and higher cost per click may be a real concern. In those cases, enhanced CPC bidding may be a better option (see below).

The Alternative - Enhanced CPC

Google defines enhanced cost-per-click (ECPC) as a bidding feature that raises your bid for clicks that seem more likely to lead to a sale or conversion on your website. ECPC...

  • also uses historical data to determine the best placement of ads to optimize conversions
  • raises a bid by up to 30% or lowers it by as much as 100% based on how likely an ad is to lead to a conversion
  • initially modifies 50% of traffic then increases based on how it is performing
  • standard bidding with added boost when appropriate
  • can control cost per click and max bid

As with everything in digital marketing, a PPC bidding strategy needs to be customized to meet the unique needs of each business. Taking advantage of the options AdWords offers should be part of that. With clients of all sizes (and budgets), Ridge Marketing has the insight to create the winning strategy for your campaign. Contact us to see how we can help you convert.

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