PPC: Reducing Spend vs. Reducing CPA

PPC: Reducing Spend vs. Reducing CPA

As marketers, we’re constantly working on a variety of objectives – build the brand, gain TOMA (top-of-mind awareness), increase followers, bring in new leads, be creative, be meaningful, share the vision. In reality, our extra-departmental coworkers (ie everyone else in the building) care about one thing: how much money are those guys making us? A smart marketer will first focus on what’s leading to the most sales and then seek to get the sales at the lowest possible cost. And that’s it. The point is not to focus on your budget, but maximizing your investment. Put a different way, worry less about spend and more about cost-per-acquisition.

This scenario plays out perfectly in paid search advertising, and it’s why cost-per-acquisition (CPA) really should be the end-all, be-all metric in your PPC campaigns. Paid search is a very dynamic medium; use this to your advantage to create the most efficient campaigns possible. And most importantly, focus on what’s going to keep finance, accounting and the bottom line in a healthy place.

The CPC vs. CPM Model

One of the most misleading metrics you can look at when evaluating a paid search campaign is click-through rate (CTR). Take a traditional CPM-based display campaign. Heck yeah you want a high CTR! You’re paying a set amount for so many impressions. It’s smart to evaluate the performance on CTR, because you can back out into the numbers and see how much each visitor cost you. Then, you can take a deeper look at the impact you made and decide if it was successful.

Paid search, on the other hand, is strictly cost-per-click, meaning your budget is only dinged when a user clicks your ad. I recommend advertisers be very picky with who clicks their ads, because the last thing you want is to waste half your budget on unqualified leads when you could be spending it on revenue-driving customers.

Use the Right Ad Text

The easiest and most intuitive way to make sure you’re campaigns are bringing in the right customers is to create ad text that is reflective of your goods or service. Let’s say you include, “Free Breakfast Tacos!” in the ads for your food truck. Sure, you’re CTR is going to be through the roof, and some marketing novices will see this as success. Wrong. You just wasted a good chuck of your click budget on poor college kids and people that don’t take your brand seriously.

Those clicks could’ve gone to an HR representative needing a $250 catering order for the sales staff, affluent professionals on their lunch break, a young mom who just moved to the area and looking for the local spots, people keeping your business afloat. Use ad text that attracts the users you want to get. Be appealing, just don’t be desperate.

Know the Hierarchy of Match Types

The easiest way to cast the right-sized net in a paid search campaign is to focus on the hierarchy of match types:

Exact: Query matches keyword exactly

Phrase: The keyword is in-tact somewhere in the query

Modified Broad: The various words of the keyword exist somewhere in the query

Broad: One of the words of your keyword is one of the words of the query

Broad match keywords will bring in a lot of unqualified traffic; don’t waste all your budget on users that aren’t looking for what you got. Exact match keywords will bring you users that are looking for specifically what you’ve got. To avoid missing out on users that search in a unique way, it is important to still use phrase and modified broad keywords, but bid lower, because it’s not until you download a query report that you’ll know how those users are actually searching.

Know How Cost per Conversion interacts with CPA

Digital marketing focuses a great deal on conversion rates and cost per conversion. This is great when evaluating engagement and performance of smaller campaigns. But at the end of the day, you have to bring in the Benjamins. Maybe your new product video is getting a ton of views because you paid top-dollar for a celebrity cameo. Is anyone putting down their hard-earned money for your new product, though? It’s easy to live in a fool’s paradise and focus on metrics that don’t have dollars coming in behind them.

Realize that high conversion rates and low cost-per-conversions are very positive signs. Just take note of what’s coming from it financially.

These CPA-lowering techniques will not just help your department’s success or increase your job security, they’ll improve your business. Additionally, they’ll give you a better understanding of who your customer is, how to serve them better and how to get more like them. Remember, a frugal marketer is an employed marketer, so be most mindful of the metrics everyone else cares about.

About the Author: After graduating from the University of Texas with a degree in Marketing, Lindsay MacDonnell started working in search, specializing in ecommerce SEO. She joined Statesman Media in 2013 as a Digital Media Specialist and manages the paid search and B2B marketing. Connect with Lindsay!