What is Cost Per Click (CPC)? Definition and Benefits

By Indeed Editorial Team

Updated October 18, 2022

Published February 25, 2020

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

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Pay-per-click is one of the many tactics you can use to strengthen your marketing campaign. It's important to track the cost of each marketing tactic you deploy throughout your campaign, so you meet budgetary requirements and evaluate your team's performance effectively. Learning about this concept may help you improve your team's sales and marketing performance.

In this article, we discuss what cost per click is, how to calculate it and what tips you can use to lower costs for a company.

What is cost per click?

Cost per click, or pay per click, measures how much an entity, such as a company, gets paid when a user clicks on an advertisement displayed within a search engine. In other words, cost per click is measured by how many users interact with a brand through ads. Since companies may get paid by the advertiser for an ad's performance, marketing professionals can make sure that the ad redirects to those companies landing page that solicits the user to respond to a call to action (CTA). Some of the ad types you can use include:

  • Text

  • Image

  • Video

  • Social media

  • Shopping

Benefits of cost-per-click advertising

Cost-per-client advertising can benefit your team by:

Increasing the chance of boosting profits

Cost per click advertising can increase profits by allowing your team to analyze which advertising campaigns are most effective and which products garner the most customer attention. A lead may search for what they want to buy on a search engine to find the lowest price and highest quality, so placing your ad with the highest searched result creates interest and improves the probability of your target audience going to your team's website. Check the functionality of your website to help customers navigate through the buying stage smoothly.

Related: What Is Cost Per Install? (Plus Advantages and Disadvantages)

Making managing spending costs simpler

When using cost-per-click advertising, you can quickly decide when to start and stop campaigns, so you know how much you paid through the duration your ads ran on the search engine. This allows you to adjust your ads campaign to be within budget. Also, you can run an ad campaign for as long as you want and you have no upfront cost, which can have enormous growth potential.

Related: Formula for Cost Per Unit Calculation (With Examples)

Providing accessible performance metrics

You can see the performance of your ads as the user clicks on them, which can determine how much your team wants to spend for the quarter or the year depending on your marketing budget. You can also find out who's clicking on your team's ads. Additionally, you have the option of adjusting your keywords and adding a promotion that incentivizes leads to go to your website.

Related: Customer Acquisition Cost (CAC): What It Is and How To Improve It

Improving exposure opportunities

You can attract your target and new audiences to your employer's products with quality ad campaigns. Cost-per-click campaigns allow you to apply remarketing tools that can drive the user back to your website based on their search history. The association with your employer's brand and the search gives familiarity to the user, so they search for that brand again when they want to make a purchase.

Related: What is Strategic Planning? Definition, Techniques and Examples

How to calculate cost per click

Follow these steps to calculate cost per click for your team:

1. Identify the ad campaign you're calculating

You can run multiple ad campaigns using different keywords to see which one is the most searchable. This way, you can gain insight into the numbers behind your employer's brand impact and you can note the demographics that showed up on your searches. This can lead to a separate marketing campaign if you see a different target audience consistently interacting with your employer's website.

Related: What Is Cost per Ticket? (With Factors That Affect It)

2. Determine the total cost per click

The average price per click shows up when you search for available keywords that you want to use for your ad campaign. The cost can vary depending on the number of companies bidding for the keyword. It notes the competition you may have with others in using it. You want to look out for the total cost of each click to begin finding the average amount for the campaign. Let's assume that the total cost per click is $19.90 to make this calculation.

Related: What Is Cost Per Lead? How To Calculate CPL

3. Find out the number of users who click on the ad

Monitor the number of users that clicked on your ad on a daily, weekly, monthly and even annual basis to check on the progress you have with engaging with your target audience. You can hand ad reports out to marketing managers and factor them into the marketing budget allocated by the executive team for the following year. Let's say a weekly ad campaign with a $19.00 cost per click received 20 clicks.

Related: Cost per Lead by Channel: What Is It and Why Is It Important?

4. Divide the cost per click by the number of clicks to get your calculation

The last step is to divide your total cost per click over the number of clicks you received for the campaign. The number can either be a decimal or a whole number, which symbolizes the total that comes out to be less or more than $1.00 per click. Using the example above, the average cost per click is $.95.

Read more: Key Performance Indicators (KPIs): Definition and Examples

Tips for lowering your cost per click

Here are a set of tips to help you decrease your price per click:

Locate low-cost keywords with little competition

You can review the cost per click per industry that you work in, so test out keywords that cost less starting and track the results over a monthly period. This helps you save on costs in the beginning, but you still can experiment with keywords to know what campaigns work in the future. Therefore, it's often worth spending more if you have the funds in your budget.

Related: What Is Cost Per Acquisition? (And Why It's Important)

Emphasize the quality score

The quality score is a search engine's ranking to identify the effectiveness of the keywords related to your ads. The score dictates how much you pay and where your ad ranks in comparison to others in the search result. Be sure to highlight your target audience to link it to your CTA and improve your quality score.

Related: 10 Pay-Per-Click (PPC) Metrics You Can Track (Plus Benefits)

Use geotargeting to focus on local searches

Geotargeting is great if you're working for a small business. It specifies the target of users in a certain area so that you can find leads in your team's specific region. Start with targeting your city and expand to your state or country if it continues to provide a sustainable amount of new customers.

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