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Do you know the difference between CPC vs. CPA in pay-per-click advertising?
These are two common metrics that digital marketers use to measure or describe the performance of their pay-per-click (PPC) advertising campaigns. Yet despite that, we often see terms like CPC and CPA getting misused or mixed up with other advertising metrics.
If you just received your first introduction to PPC, it’s understandable that you might be confused – but seasoned digital marketers should be well versed in the differences between CPC vs. CPA, why they’re important and how to optimize each performance metric.
To help you differentiate between these and other advertising metrics, we’ve created this short guide that explains the difference between CPC vs. CPA in digital marketing. We’ll also cover the most basic marketing metrics that anyone doing PPC should know about and explain how to optimize both CPC and CPA to improve your advertising performance.
Measuring PPC Campaign Success with CPC vs. CPA or CPM
Before we make a distinction between CPC and CPA, let’s start by grounding ourselves with some basic facts about PPC advertising and the metrics used to measure PPC advertising performance.
When you manage a PPC advertising campaign, you’re essentially creating a marketing funnel with two or three different touchpoints. If you were to map out the ideal customer journey, it might look something like this:
- A user types a search query into Google using a keyword that you’ve targeted in your advertising campaign
- Google decides that your ad is relevant to the user, so the user sees your ad displayed at the top of their Google search results
- The user likes your ad because it offers something that satisfies their search intention (solves their problem, gives them what they want, etc.)
- The user clicks on your ad, which brings them to your landing page with more information about your offer.
- The user chooses to accept your offer by taking the desired actions that satisfy your campaign objective (purchasing a product, submitting their email address, or registering for a webinar, for example)
A simplified version might be condensed to:
- User searches on Google
- User sees ad
- User clicks ad
- User accepts the offer (converts) on the landing page
This brings us to some of the first metrics we can use to measure the customer journey for our PPC campaign:
- Impressions refer to the number of times your ad displayed
- Clicks refer to the number of times people clicked on your ad when it was shown to them
- Conversions refer to the number of times a user took the desired action on your landing page
Image: Each time a user sees one of your ads, that counts as a single ad impression. Digital marketers use the CTR metric to quantify how many clicks are generated per ad impression.
Armed with these metrics, we may want to go a step further and see how efficiently our advertising campaign is pulling prospects through the funnel. We can measure things like:
- Click-through Rate (CTR) = Clicks / Impressions
- Conversion Rate = Conversions / Clicks
Next, digital marketers may want to start assessing campaign cost metrics. This is where CPC and CPA come into play. To quantify these metrics, digital marketers need to know how much they’ve spent on a campaign during a specified time period. From there, it’s easy to calculate:
- CPM (Cost Per Thousand) = Campaign Cost / Impressions
- CPC (Cost Per Click) = Campaign Cost / Clicks
- CPA (Cost Per Acquisition) = Campaign Cost / Conversions
CPC vs. CPA: What’s the Difference?
CPC is an advertising metric that measures the cost of generating a single click on one of your ads. To calculate your CPC, take the total dollar amount you’ve spent on your ad campaign and divide it by the total number of ad clicks that were generated.
CPA is an advertising metric that measures the cost of generating a customer acquisition through your advertising campaign. To calculate your CPA, take the total dollar amount you’ve spent running ads, then divide that by the total number of conversions that your campaign achieved.
CPC vs. CPA: Which is More Important?
When it comes to measuring CPC vs. CPA, which metric is the most important?
For digital marketers, there are compelling reasons for tracking both metrics closely throughout the campaign management process.
CPA is directly related to campaign success. Once you have enough campaign data to calculate your CPA, you can start comparing that to your customer lifelong value estimates to make sure your advertising campaigns are effectively driving business profits. If your cost per acquisition is too high, your campaign will lose money even if you generate a lot of conversions.
Clicks are user interactions that lead to visits on your landing page that you can turn into conversions. Tracking your CPC can help you evaluate whether you’re generating enough ad traffic at a low enough cost to ensure a profitable PPC advertising campaign.
Optimizing for CPC vs. CPA: What’s the Difference?
What happens if either your CPC or CPA is too high for your campaign to be profitable? What can you do about it?
If you think you’re spending too much to generate individual clicks, there are a few things you can do. Start by optimizing your ad relevance to increase your quality score as much as possible. This allows you to successfully win keyword auctions more frequently, but for a lower cost. You could also try bidding lower amounts on different keywords and optimizing your ads for CTR to get more clicks for a lower cost.
If your cost per acquisition is too high, you’ll struggle to run a profitable campaign. You can improve your CPA by optimizing your landing pages with tools like Unbounce, Hotjar, or Instapage.
Image: Optimize your landing pages with Unbounce to improve your CPA.
We hope this guide clarifies the difference between CPC vs. CPA in digital marketing.
To summarize, the CPC metric quantifies the average cost of ad clicks in a PPC campaign, while the CPA quantifies the cost of goal conversions in a PPC campaign.
The best digital marketers understand the difference between CPC vs. CPA, and how to improve either one by modifying ad elements, landing pages, or keyword bidding strategy.