[CPC for e-commerce] What it is and how to reduce it to increase the ROI of your online ads

CPC advertising seems like such a bargain, right?

It’s much more profitable than an old-school marketing campaign because you only pay when someone clicks on your ad.

Or at least, in principle.

Because paying €3 or €4 for every click doesn’t sound so good, does it?

This is a common problem among e-commerce shop owners wondering how to optimize their online advertising campaigns. 

If that’s the case for you, keep reading because this post is going to tell you:

  • How the CPC model works
  • If you’re paying too much for your ads or not
  • Tips to lower the cost and increase the profitability of your marketing campaigns

Ready? Here we go.

👉 What CPC is and how it affects your e-commerce profitability

Here’s what it means, just in case: CPC stands for Cost Per Click, a well-known model for online advertising.

As we mentioned above, it’s quite appealing because you only pay when users click on one of your ads.

Which brings us directly to the most important part:

Optimizing the CPC of your ads directly increases the profitability of your campaigns.

But here’s the million-dollar question…

✅ How is the value of each click established?

There are several factors, but one of the most important is the competition, which is to say, the number of other companies striving to reach the same audience as you.

This means your campaign’s CPC may vary according to:

  • Your sector
  • The city where you’re advertising
  • Whether you’re advertised on Google Ads or Facebook Ads (or an alternative platform, like Snapchat).

But fear not! We’ve got plenty of tricks to help you lower the cost and pay less than the competition. Read on to learn more. 😉

Before we get to that, let’s have a look at which models are most suitable for this system.

👉 CPC, CPM, or CPA: Which paid model is best for your e-commerce?

You may have noticed all the acronyms that are often used when talking about online advertising:

  • Cost Per Mille (CPM): You pay for each thousand times your ad has been displayed. It’s a popular model with branding campaigns, where the point is for users to become more familiar with your brand image.
  • Cost Per Acquisition (CPA): In this case, you only pay if a sale has been made. It’s commonly used in affiliate marketing campaigns.

There are other payment models, but these are the three most common.

Now you might be wondering, “Which one should I use for my campaigns?”

The answer is that no model is better than the others – it all depends on the goal of your campaign.

CPC is normally used for:

  • Capturing traffic: Directing a large number of users to your website can be useful to improve your SEO if you have a relatively new e-commerce or if you want to get leads for your conversion funnel.
  • Getting sales: As it relates to online stores, the CPC model is more frequent in campaigns for either little-known or high-value products. In these cases, users aren’t likely to buy on their first visit, so it’s best to attract traffic to redirect into your remarketing strategy.

As you can see, it’s a highly advisable model if you want to promote your brand at the same time as you capture traffic.

👉 Figuring out whether the CPC of your ads is worthwhile

When launching their first marketing campaigns, many e-commerce shops make the same mistake by assuming everything’s going their way if the CPC remains low while sales increase.

However, that doesn’t necessarily mean that your return on investment is making it worthwhile.

If you really want to know what kind of results your campaigns are generating, you just need to follow these steps:

  1. Divide the total clicks by the total sales (so you know the number of clicks you need to get a conversion).
  2. Multiply that figure by the CPC.

This allows you to find out the cost of each sale or, in other words, the Cost Per Acquisition (CPA) of that sale.

We can summarize it in simpler terms:

CPA = (Total clicks/Conversions) x CPC.

All that’s left is to compare the CPA with the average checkout price of the customers you captured with that particular ad.

If you spent less than what the customer spent in your shop, your campaign is profitable.

Easy, right? 😉

But if this operation doesn’t yield positive numbers, it means you have to roll up and your sleeves and get to work trying to reduce the CPC as much as possible.

Let’s see how you can do that.

👉 Tricks to reduce the CPC of your marketing campaigns

Believe it or not, online marketing platforms don’t just consider how much you’re willing to invest. They also pay attention to the quality of your ads.

And what does that mean?

If your ad suits the needs of users better than the competition, your CPC will decrease.

And not just a little bit.

In the case of Google Ads, for example, a good quality level allows you to pay up to 50% less than your nearest competitor and still appear on top. 

Follow these tips to make it happen.

✅ 1. Increase your CTR

First, you should check the ad’s CTR (Click Through Rate).

This metric refers to the number of clicks your ad receives per every 100 views by users.

A high CTR indicates that the users viewing the ad find it interesting, which gives you points.

Here are some tricks for that:

  • Appealing titles: Your ad’s title should be fancy and specific to pique users’ interest.
  • Descriptive texts: Focus on the benefits of the product instead of its features. For example, if you’re trying to sell a phone that takes good pictures even without much light, you could say, “Crystal clear pictures even at night” instead of “Night light sensor”.
  • Accurate segmentation: You’ll have more probability of selling a product if you target your audience’s needs properly. We’ll tell you more about that later.

A good CTR is important, but watch out – marketing platforms know what happens when users land on your site and they will bear it in mind. 😉

✅ 2. Make your ads more relevant

Relevance (also called “quality”) reflects how useful your ad is for a user. The higher the score, the less you have to pay for CPC.

To increase your ads’ relevance, you must:

  • Link them to a very specific page: If your ad shows a certain model of shoes, it should lead to the product card of those specific shoes, not your homepage. Otherwise, your customers will leave because you’re creating a bad user experience.
  • Increase conversions: Closely related to the previous point. The more descriptive your ad is, the more likely you are to sell it, and that will also reduce your CPC.
  • Align your keywords: Especially if you include text ads on Google Ads, your ad and your landing page must be optimized for the same keywords. In doing so, you’re helping Google understand the connection between both. 

Each platform follows its own relevance criteria, so it’s crucial that you double-check them when optimizing your ads.

✅ 3. Segment to a T

For your ad to be successful, you mustn’t have any doubts as to who your buyer persona is.

This will allow you to create a much more specific ad for your target audience, touching on their pain points, and elaborating on the advantages of your product that are most applicable to them.

Doing that will also increase your CTR and save you from wasting money on irrelevant clicks.

✅ 4. Test, test, and keep testing

Even if your ad works fine and your ROI is positive, there’s always room for improvement.

And for that, you need to constantly measure and analyze your ads’ performance.

The most common strategy when launching an online campaign is to create two or three versions of the same ad to see which one works best.

Remember to change only one thing at a time: the title, the ad description, the call to action, etc. This will allow you to measure the effect of each modification more precisely.

If you have any questions about this, check out this guide on A/B tests.

👉 Ready to lower your e-commerce CPC to the ground?

If you think about it, it can all be summarized in one idea:

The more useful users find your ads, the less you have to invest to have a more profitable campaign.

And this holds equally true for most marketing platforms.

If you need more help optimizing your online ads, here are a few useful posts for you:

Get started with everything we’ve told you in this article and see the impact on your profits for yourself. 😉