When to choose CPC or CPM in Digital Marketing?
Both CPM (Cost per Thousand) and CPC (Cost per Click) are two different types of bids used in Digital Advertising campaigns. You may be thinking: What are bids?
To put it simply, it is "how" we want to be charged for promoting our ads. When we set a budget for marketing campaigns, we must also define how we would like that spending to occur, based on the marketing objectives we have. In this blog you will learn everything you need to know about CPC or CPM.
HOW DO THEY WORK?
With the CPCwe will be charged for each click on our ads and we can define how much we want to pay for each click or the system will define it automatically for us (RECOMMENDATION: Never use the latter).
For example,
Imagine that you are going to invest 300€ per month in Google Ads campaigns. So to distribute the budget throughout the month and have my ads displayed every day, I set a daily budget of €10.
After setting a CPC bid, I only want to pay when they click on my ads. So I set a CPC of 0.10 cents. For each click I am going to be charged 10 cents. So if I have a budget of 10 € per day and a CPC of 0.10, I will have an average of 100 clicks per day. Check this blog if you want to know how to apply a good CPC so you don't spend too much or your ads don't stop showing..
What about the CPM? Through this type of bidding I am only going to pay per impressions, to be exact for every 1000 impressions I am going to pay an amount. Let's imagine again that we are going to invest 300€ per month in campaigns. I distribute the budget in the same way in 10€ per day, but this time I choose the CPM bid, so I establish that I want to pay 0.10 cents per thousand impressions. So I will have 100,000 impressions per day on average.
You may be thinking, What's the point of me choosing how much I want to pay?
This is a very common question and many people think that since "I choose the budget and how much I want to pay for each interaction" I will always set the cheapest bids, so I save money. But that's a mistake.
They are called bids, because you are competing with the rest of the companies that advertise the same as you. So whoever pays more, will have a better position, will advertise on better websites and will probably reach higher quality audiences.
For example in Search ads, the first 5 search positions are paid ads. If the first one is paying a CPC of 0.50 cents, I have to pay 0.51 to appear above him. If the last one is paying 0.20 and I have 0.10, my ads are not going to be advertised due to limited budget.
Let's imagine I have a sports equipment company and I want to advertise on the page Marca.com (Display ads) that attracts millions of monthly visitors and is also related to my industry. But I have a CPC of 0.10 and to show my ads on that page I would need a CPC of 0.60. So instead of advertising on Marca, I might advertise on a page with almost no traffic and little known where my visibility is quite limited. With the CPM it works exactly the same.
The fact that you can select how much to pay for each bid, should be used to study how much I want to afford to spend and how much profitability I earn for each sale. Companies selling cell phone cases for 5€ are probably paying a CPC and CPM of 0.05 cents to appear in the top positions. But a company selling new cars for +20.000 € could afford to pay a CPC or CPM of 2€.
Also the CPC or CPM can vary depending on the competition, i.e. the number of companies that are advertising. If there are 10 car companies that are advertising in Search campaigns in Spain, the budget is defined between the one that pays the most and the one that pays the least on the first positions. An average is made between all the companies, let's assume that it is 1 € per CPC. But suddenly, the following month there are only 7 car companies advertising in Spain, now there is more space to publish your ads so the average CPC decreases to 0.75 cents. The opposite can also happen.
If from 10 companies there are 15, the average CPC can go to 1.50 €. Therefore, you should always be monitoring your campaigns and adapt them to market conditions. This way, you avoid that the ads are no longer shown or that you lose profitability due to the increase of the CPC or CPM. There are many optimization strategies to make sure you are always profitable.
Bids are usually fair and optimized to the profit margin of what is sold and advertised in Ads. No company sells below its profitability, they have to pay workers, bills and eat. That is why the one who pays the most, does it knowing that it will be profitable, even in the long term (And if it is not profitable, his ads will not last long). You are not going to find a CPC of 1€ if you sell mobile cases for 5€, don't worry. But you should know that even if the one above pays more than you, it does not mean that if you get to their level, you are going to be profitable. Even if you sell the same thing, each company has its own ecosystem of expenses and benefits. Control the CPC, don't try to be clever and impress.
Study your profit margin, how many clicks you would need to generate a sale and project the budget you can afford to invest, in order to establish an appropriate CPC or CPM for your company.
How do I know what is the average CPC or CPM of the market?
Use the "Keyword Planner" tool found inside your Google Ads account, it's free. You will be able to search for the keywords you want to advertise with and Google will tell you how much is the price (CPC or CPM) for that keyword both at the top and bottom of the searches. If you don't use Google Ads, there is a similar tool on the Ubersuggest website.
In Display ads is more complicated, since it does not work by keywords, I recommend that you start with a low budget and gradually increase it. Google will warn you if your ads are not shown because of low budget and maybe recommend you one (Do not always pay attention to Google's recommendations). You can also take a look at "landing pages" to see where my ads are shown. If you see that your ads are not shown on moderately famous pages and are advertised on brown pages, it is because your CPC, CPM or daily budget is low.
Now that you are an expert in defining your budget and bids, it's time to take action:
When to choose CPC or CPM in Digital Marketing?
It depends on the strategy you are going to use in your campaigns and for what purpose.
Choose CPC as long as:
You want a conversion or user action to occur on your website. To do this they must enter the website and make a purchase, fill out a form or make a call. That is why it is better to pay per click, i.e. for each person who goes to my page after clicking on the ad.
It will help you whether you advertise products or services in Search or Shopping (Google Ads) or make branding ads with Google Display, Discovery, Facebook Ads or Native advertising and you want that branding ad to cause a conversion on your page.
Choose CPM when:
Only when you do branding, but unlike CPC, when with these branding ads you do not intend that the user reaches your website to make a conversion or get into a sales funnel. You simply want to make yourself known or show your products in case "later" they are interested in buying from you, but in an organic way. Just as it is done in TV ads. I show my products or services in ads, but I am not waiting for an interaction from the consumer at that moment. It is ideal if you have a brand and you want to make yourself known (Branding without direct sales intention).
There are exceptions, for example some YouTube ads do not have CPC and only work on a CPM basis.
You may ask yourself, what is branding? well... basically, showing your brand to people who have never seen you before and probably have no intention of consuming your product or service at the moment, so "you must convince them to buy you" They are ads of all life, television, radio, billboards, banners on websites or social networks...
It differs from SEM advertising (search engine advertising) where instead of convincing the user to buy from you, in these ads they are already convinced to buy from you and you only have to position yourself so that they find you when they search for your product or service in search engines. You are half way there.
Although if you need more info on the latter, google it or send us a message, I've already made too much of it hehehe.
I hope I helped you :)
I invite you to visit our website and our help services for companies with Google Ads
See you, SEE YOU NEXT TIME!