What is CPC? Learn How to Calculate, Optimization Steps, and How it's Different from CPM

In marketing and advertising, one approach to calculating the effectiveness of advertising is CPC or cost per click.

This metric is used to determine whether the advertisement is successful and attractive to the target audience or not.

To understand more about CPC, here we explain the definition, how to calculate, advantages, disadvantages, and how to optimize the costs.

What is CPC?

Quoting Amazon Ads, CPC is the amount of money spent by advertisers to display their ads on a site. The main benchmark is how many clicks on the ads that appear on the site.

Often referred to as PPC or pay per click, this metric must be understood by marketers so that the results of their brand campaigns reach their targets. CPC can also be a reference for marketing strategies in measuring how effective advertising and costs are.

The way to measure its effectiveness is a small advertising cost, but can produce quality clicks (for example new users or transactions). CPC calculates all clicks on ads that appear on sites, social media, and search engines (Google).

How to Calculate CPC

To calculate the cost per click in an advertisement, you can use the formula:

CPC = advertising cost/total clicks

Example:

Total advertising cost spent by the brand: IDR 10 million.
Total number of clicks on the advertisement: 1000.
Therefore, CPC = 10 million/1000 = IDR 10,000.

From these figures, it can be concluded that the cost is quite large and the results are less than optimal. Moreover, with a total advertising cost of IDR 10 million, you only get 1,000 clicks and a CPC of IDR 10,000.

An effective advertisement that attracts the audience's attention must have a high total number of clicks and a low CPC. So, you have to think of a new strategy to optimize and even reduce the advertising costs.

How to Optimize CPC

One effective way to cut and optimize CPC is to maximize the content in the advertisement. Investopedia divides this method into two categories:

Ad quality

Some steps to improve ad quality include:

Create an attractive copy: change your ad to better suit the needs of your audience, for example by highlighting the features and advantages of the product and make sure the copy matches the main keywords of the product.
Ad relevance: your ad must match the needs and answer the audience's problems. If you are advertising on a search engine, then do research on the keywords they use and insert them into the ad copy.
Landing page quality: when the ad is clicked by the audience, they will be taken to a page on your site that is related to the product being advertised. So, you have to make sure that the landing page is easy to navigate and the page can load in seconds.
Target audience research

As explained above, you can find out the keywords your audience uses to search and use them as part of your ad copy. To get to that point, you can do the following:

Determine the target: You have to determine the profile of the target audience who will receive the ad.
Divide ads: this strategy is quite effective because you can spread ads to various types of audiences and use different keywords.
Create ad groups: almost similar to the previous point, where you can target different audience groups. However, in this strategy, you can group ads based on the products and services advertised. For example, when selling smartphone accessories, you can group ads for headphones and ads for chargers. Of course, you must first know the main keywords used by the audience to search for information about each product.

Advantages and Disadvantages of CPC

Advantages of Cost Per Click

Have a clearer target audience and higher click potential.
The main target of CPC is to convert from clicks to transactions.
It is easier to measure the effectiveness of advertising because the higher the clicks, the more interesting the ad is.
Bring more audiences to the advertiser's site and increase the amount of traffic or visitor numbers.
CPC can produce important information about the habits and preferences of the audience regarding the ads received.

Disadvantages of Cost Per Click

CPC can be more expensive if the ad is not placed at the right point and the copy is not interesting.
Changes in costs and prices that can occur at any time due to various factors, ranging from ad quality to competition for ad spots.
Cannot be used as a benchmark for brand and product awareness. Audiences can forget your product or site in seconds.

Difference between CPC and CPM

There is another metric in measuring the effectiveness of advertising, namely CPM or cost per mille. CPM is also often a consideration in the marketing team's advertising strategy. CPC and CPM are usually at the same level in strategic considerations.

Summarizing Spider AF, the difference between CPC and CPM lies in the advertising cost factor, namely:

CPC calculates advertising costs based on the number of clicks on an ad. In other words, the more clicks, the higher the advertising costs.
CPM calculates advertising costs based on the number of times an ad is viewed by the audience. This metric is called an impression. So, even if the ad is not clicked by the audience, your ad will still be charged.

CPC is a reference for advertisers, marketers, and site owners, namely to ensure that the ads displayed are attractive to the audience.

To master more about CPC and advertising science, you must first master digital marketing.

You can learn it by following the short program prasmul-eli entitled Digital Marketing Fundamental. There are digital marketing experts and professionals who are ready to share their knowledge with you. Visit this page to learn more and register for the program!