Having a CPA in mind is essential for Google Adwords PPC, especially if it’s a performance based campaign. I could end the article right here, run through a field of wheat and be home for tea before you can say PPC. Instead get yourself comfy, pick up your brew and let me tell you a story…
Firstly, just to explain Google AdWords is the system Google has developed so businesses can market products or services in the Google Search Engine. The main use for this is bidding on keywords which can appear as adverts at the top of Google Search Results. Google Adwords can also be used for Display Advertising, Gmail and YouTube. For more information see our PPC Page
What is CPA?
Does it stand for Certified Public Accountant? Colourful Pony Association? Cheesy Posted Article? Afraid not..
CPA can stand for Cost Per Acquisition or Cost Per Action. It depends on how your business works, but you can optimise for either.
See the explanation below:
COST PER ACTION – This is how much you pay in order to obtain a conversion. A conversion could be lead generation, form completion, phone call etc.
COST PER ACQUISITION – This differs slightly as this is all about revenue. Acquisition kicks in once someone becomes a paying customer. This tells you exactly how much it cost to acquire a customer.
Confused yet? Let’s put this into context. Say you sell a product/service that you advertise online with Google Adwords. Let’s also say you currently make £50 per customer. When a potential customer visits the website in order to apply for the product they have to fill in a Contact Form/Call Back form. This is set as a conversion (Action), the potential customer is then called back and is converted to a sale over the phone (Acquisition)
Out of these conversions (actions) 1 in 3 people buy the product (Acquisition)
Types of current cost are explained below:
COST PER ACTION – £10
COST PER ACQUISITION – £30
REVENUE PER CUSTOMER – £50
In this circumstance, more money would be made per customer than it currently cost to acquire. Further optimisation can be made to try and bring this down, making the profit bigger.
Most websites will have a complete online journey, so it’s likely you’ll only have one CPA to worry about. In most circumstances it doesn’t matter what the definition is. What is important is you know what to optimise for going forward.
So how does having a CPA in mind help new business looking to advertise on Google Adwords PPC?
Having a CPA in mind even if it’s just a gauge is vital in identifying success. This is essential in all aspects of running advertising in Google Adwords, considering keywords come in all shapes and sizes, with different cost and performance attributes. Evaluating them ultimately comes down to CPA in any performance based PPC campaign. So, if we already have a figure in mind, getting rid of keywords that either don’t convert or aren’t cost effective becomes a simplified task, providing the opportunity to make data-driven decisions early on.
JUMP THE QUEUE FOR A/B TESTING
Just to briefly explain what this is, A/B testing (sometimes called split testing) is essentially where you would have two versions of a web page – version A (current) and version B (test). Visitor traffic would be split between these at the same time. The page with the best performance wins. Having a CPA in mind would allow the introduction of this sooner than those who don’t. It would be clear from the CPA achieved from the test if this was successful or not.
Why bid on keywords that lose you money? With a CPA you can avoid wasting money on key terms that don’t perform and focus on areas that do, thus maximising the potential early on.
WHAT COULD NOT KNOWING A CPA DO?
Google does focus on key performance metrics, such as CTR (click through rate) and quality score. But essentially if the CPA is not known, there is always the risk of optimising the campaign towards key terms which could ultimately be unaffordable.
So in review, having a CPA in mind gives you the ability to make informed decisions when optimising the campaign, it makes it easier to identify what success looks like early on and it minimises the risk of failure.