CPC, CPM, CPA, CTR, CPL – How and What is Best for You?

Term

Definition

How to measure

Why is it useful?

1

Cost Per Click (CPC)

Cost per click is also known as per pay click, is one of the mostly used online marketing methods which is used to direct traffic to websites, in which the website owner gets the pay from the advertisers once the ad from that website is clicked.It is sometimes simply regarded as the amount spent on an advertisement to get clicked.

The most general query asked by almost all the advertisers that how much a CPC Cost?To understand the scenario, here are some facts to consider, every advertiser has a monthly budget, and also has an idea of a maximum cost to be spent on targeted keywords.

In our case we have spent $50 to $50000 per month and even more.

The formula to calculate is:

(Competitor AdRank/Your Quality Score) +0.1= Actual CPC

Example: If a website has a CPC of $0.10, and if you want to advertise on that then, you have to pay $10 for 100 clicks on your advertisement.

CPC or Cost per Click is very significant as it is the value that determines the financial success of paid search campaigns, and that can be analyzed to identify how much the AdWords is going to cost you. It helps you analyze your ROI (Return on Investment), know whether you are under or over paying for your intended action, and assist you to know how much you have to pay for the clicks.As the overall ROI is analyzed by the quality traffic and how much it is going to cost you, it is crucial to also consider cost per click by taking into account both the value and cost of the advertisement.

2

Cost Per Thousand (CPM)

CPM (Cost per impression/Cost per thousand impressions (CPI)) determines the cost that is agreed by the advertisers to pay for per 1,000 views for the desired advertisement. CPM is a marketing model in which there is no compulsion of clicking an ad by the visitor of a website. Only the appearance of the ad falls under CPM model, and it is considered as 1 impression every time the ad is going to presence in front of the user. A certain amount is decided to pay for every 1000 impressions which agreed by the advertisers.

It is basically the amount paid for 1000 impressions to reach 1000 users through a provided medium.The Formula is:

CPM = Cost / (Target Audience / 1000)

OR

CPM = cost x 1,000 / target audience
(CP “M” is the roman number for 1000)

CPM (Cost per Impression) in addition to cost per acquisition and cost per click is the best way to analyse the profitability and cost effectiveness for the selected online marketing model. CPI or CPM is the most related online marketing model for those advertisers who provided in other media sources like radio, television or print media, which are selling on the base of analysed and estimated listenership, viewership and readership of the media. After the advertiser agreed on the price described for CPI or COM, this is the amount spent for every thousand impressions which is qualified as per guidelines.

3

Cost Per Action/ Cost Per Acquisition (CPA)

CPA (Cost per acquisition/Cost per action) is the marketing model where only after a delivery of desired acquisition or action the advertisers have to pay as per agreed costs. It is considered as the most effective marketing model, as advertisers have to pay only when the advertisement meets the desired purpose. In this model the conversion rate totally depends on the conversion rate of the advertiser’s website, which cannot be controlled by publisher. It is generally used for affiliate marketing links.

CPA (Cost-per-acquisition) is the method in which advertisers decided to pay as per their budget and the amount they want to spend on a conversion which is desired by them. This model mainly focuses on the conversion instead of just clicks. The advertisers as use pay per click model, but the AdWords automatically adjust the bids to get more conversion. In this model after setting up conversion optimizer a target CPA is set to get the best outcome.

CPA (Cost per Acquisition/ Cost per Action) is the model used for paid marketing which helps you to steadily control the flow of investment on the advertisement. Instead of paying as per CPC to Google, CPA allows you to pay just only when someone clicks on the ad and perform the desire acquisition set by the advertiser. The action or acquisition might be a lead generation, sale, subscription or download and/or any other conversion define by the advertiser. This model assists you to avoid spending capital on search terms not defined with your business, only after performing the desired action and after the user gets converted the advertiser has to pay for it then.

4

Click-Through Rate (CTR)

Its definition is the percentage of users who are engaging or viewing the web page and who are clicking on some specific ad present on that web page. This method is used to analyze the success of an ad in generating the interest. A high-click through rate assists the website’s owners and supports them with advertising capital on the site. A typical click-through rate is 2-3 users from 1000 users as the users are desensitized to ads on web pages.

Click- through rate is actually the percentage of individuals click on the ads. The Formula of Click Through rate isClick Through Rate= (Total Clicks on Ad) / (Total Impressions)

Click through Rate helps in measuring the advertisement’s effectiveness. The Formula is

CTR = (Clicks/Impressions) x 100

Example
If there is 1 click for every 1000 impression the Click Through rate is 1.0%

Click through rate is the metric which is utilized to analyze the ad performance, calculated by the formula discussed above. Click through rate provides the user with a detailed look and deeper knowledge about the effectiveness of your advertisement. There are a few factors which are best provided with the CTR, those are:

• Helps in evaluating the call to action ad copy

• Provides the users who is the potential conversion

• Assist to determine success in compare with competitors and even between campaigns

• Enhance Quality Score which ultimately improves CPC and increases ROI

5

Cost Per Lead (CPL)

CPL, or Cost per Lead is another online advertising model used by organizations which are interested in investing money for lead generated. In this marketing model the user as clicked on the advertisement banner will redirected to the target site and asked to fill a form or call to perform a subscription. As soon as the users perform the desired action, a lead is generated, for which the advertisers have to pay based on the agreement for CPL. CPA (Cost per Acquisition / Cot per Action) and CPL (Cost Per Lead) are generally used interchangeably, but Cost per lead advertising method is considered more specific.

Measuring the CPL (Cost per lead) is performed in various ways. It is suggested to use simple calculation. To calculate it simply divide the total price of your campaign with the amount of conversion you get. For example, if you spent $500 for an advertisement and received 10 clicks, then the CPL is $50. But in reality the price is a very small factor to beconsidered, the source of the lead is important. To understand this a prompt query is asked, how did you hear about us? As the conversion source is not necessarily shown in the analytics, this can provide you the way to record and track.

Cost per lead or CPL is equally important to your business compared with other marketing models. The basic thing for the marketing model is that the focus is the results, the improvement the business activity the sales team is experiencing, the change in revenue, the return on investment and every other thing. With CPL it helps you compare value for your business, in case of small and new business the CPL model will vary significantly. CPL is providing much higher results in the beginning of any campaign.These are the basic paid marketing models which every advertiser and business/website owner experience. This article is to provide you every basic detail with the advertising models mentioned above, to assist you to select the best as per your business and as per your budget.