Why High CPC's can be good for a SEM campaign

Dan Verhille

The case for high CPC’s

Let me guess, you’re here because your client is complaining about high CPC’s in your SEM campaign.  You know that you’re on top of best practices and you’ve chosen your high bids strategically, but your client is stuck on the idea that a good SEM manager should be reducing CPC’s.  How do you overcome this obstacle? We’re here to help.

The first step to solving this problem is understanding where your client is coming from. That starts with asking questions, and listening to your client.  You may be thinking, that’s obvious, why would anyone need to hear that? Well, you might be surprised. 

Even if your client is wrong and you’re right, how you go about telling them will make a huge difference in how receptive they will be to your message.  Handle it correctly and you’ll have a chance to showcase your expertise. Handle it incorrectly and they’re going to think you’re covering your own butt. 

So let’s consider where our clients are coming from. Many may have managed their own campaigns before realizing they bit off more than they could chew.  They were learning best practices, many of which have the benefit of lowering CPC’s – writing better ads, creating better site content, adding robust negatives, fully utilizing ad extensions, etc.  The key takeaway here is that the building blocks of their SEM experience taught them that better SEM practices leads to lower CPC’s and better performance and it’s difficult.

What these clients often don’t realize when they hire an agency is that you’ve already maximized the gains from best practices.  Sure, you’ll make some marginal gains from your optimization cycles, but if you’ve done your job well there won’t be any easy wins from best practices 101 like “add callout extensions.”  Instead, your wins are going to come from convincing your client that using your budget effectively at this stage is more about strategy than tactics.  And yes, in many cases that means higher CPC’s.

I’ve laid out a few approaches that can guide digital marketers in educating their clients on why high CPC’s can actually be beneficial to a digital marketing effort.   And while you read through these approaches, keep in mind that you should be strategic in what explanation you use with which client.  Just like a digital marketing strategy, there’s no ‘one size fits all’ approach.  Think about your client’s personality and ideology when choosing the right argument to make your case.   

1. Conceptual explanation: SEM CPC’s are determined in an auction. As in any auction, people bid higher on things they perceive to be more valuable. That value could be measured in conversion rate, revenue per conversion, or time on site.  More often than not, those value assumptions are based on mounds of performance data that tell them those keywords produce the best results.  Those keywords are expensive because they are valuable, period.

If you believe that the market is generally efficient, people would not continue to pay so much for those keywords if they weren’t getting a satisfactory return.  When the value declines, so will the CPC.  This is a simplification of reality, but for any of your clients that have a strong capitalist bent, this line of reasoning will resonate.

 2. ROAS, ROAS, ROAS! This is a very straight forward argument in an e-commerce platform that doesn’t need any explanation, but how do you handle it in a lead-based environment and longer feedback loops? For starters, you do everything in your power to maintain the feedback loops.  Then, you have to make sure your customer properly prioritizes the longer-term metrics by properly presenting the right data.

Here’s an example I ran into working with a national chain of remediation franchises:

 

Imagine this is the data you saw on a monthly basis for two types of services:

Keyword Spend Clicks CPC Conv CR CPA
Water Damage Cleanup $500 17 $30 3 18% $167
Mold Damage Cleanup $500 50 $10 10 20% $50

Wow, so Mold Damage is crushing Water Damage in nearly every imaginable metric.  The client says, "let’s put all our budget into Mold Damage next month."  Not so fast.


When we closed the feedback loop and got data back on average job size, a very different picture started to emerge. We found out that the client made nearly 4x as much from the average water damage job compared to mold damage jobs, when the client previously assumed there was no relevant difference.

Not only did closing this feedback loop provide useful business insights, it showed us that we could gain a large increase in ROAS simply by re-prioritizing our budgets towards.  When additional budget was given towards water damage, we were able to increase efficiency at scale, increasing the margin by which our high CPC keyword beat out it’s competitor.
 

 3. Getting Creative with Site Engagement Metrics: So, maybe you’re in a situation where revenue isn’t the primary goal. Maybe you it’s because you work in an industry where certain types of conversion data can’t be tracked legally. Maybe it’s difficult to create a reliable proxy goal for value due to an archaic site structure.  Maybe it’s because you haven’t completely solved for cross channel and cross device attribution, and you can’t rely on your conversion/revenue data to tell the full story. 

 

Where do you turn when your client thinks maximizing traffic on site with cheap clicks is the only path forward? I advise you try commoditizing site engagement metrics to help  re-frame the quality over quantity argument. 

 

Take metrics like Bounce rate, Session Duration and Pages per Session, analytics goals – and find a way to apply costs to them.

 

For example, we ran a test to compare site engagement on a high and low CPC keyword on a fixed budget.  Then, I separated out Single Page Sessions from Multi-Page Sessions based on analytics data.  I explained to our client that single page sessions are almost always a sign you wasted your money, as they left before taking any other action, when we’d like them to take several. 

 

Then, I broke down the Cost per Quality Session, which is essentially “Cost/(# of multi-page sessions).” 

 

 

Amount Spent

Clicks

CPC

Bounce Rate

Single Page Sessions

Multi-Page (Quality) Sessions

Cost Per Quality Session

Keyword 1

$100

200.0

$0.50

80%

160

40

$2.50

Keyword 2

$100

133.3

$0.75

60%

80

53

$1.88

In this test case, you can clearly see that after filtering out all the people who bounced immediately, the higher CPC keyword resulted in higher quality traffic.  

You don’t always have to use this particular metric to support your argument.  So long as the metric reflects actual on-site value, don’t be afraid to commoditize various site engagement metrics to provide your client with alternatives to low CPC strategies.  Get creative and find a metric that's a good proxy for value, then break it down in a way that helps your client see beyond CPC.  

 

 

 


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