Many of us have considered and/or already running PPC(Pay Per Click) also known as CPC(Cost Per Click) ad campaign on Google. However, most of us don’t know that we don’t always have to pay Google upfront for each click to bring traffic to our website.
In this article, we are going to learn yet another Google Ads strategy known as CPA (Cost Per Acquisition). Just by its name, many of us already get the idea about what CPA is. In PPC/CPC you pay per click, whereas in CPA you pay per acquisition or conversion. Which means, you don’t have to pay Google for all those clicks that may never turn into a conversion.
It sounds good, isn’t it?
However, as we have already established the fact that Google doesn’t work for free, after all, Google also needs to generate revenue just like us.
So how does CPA work?
In simple words, you tell Google what a conversion is on your website by defining a conversion action on Google Ads Campaign. Once Google learns exactly how users are converting and whether the conversions are enough to offer you CPA, only then you are allowed to run a CPA campaign. That’s right! It’s in Google’s hands whether to allow you to leverage CPA strategy or not.
How to convince Google Ads Platform to allow you to run a CPA ad campaign for your business?
Well, the idea is simple yet complicated to execute. You have to define conversion actions on your website using Google’s provided “Codes” and allow Google to connect using Global Site Tags and track all the conversions on your website.
Most of us have already lost interest after reading the last paragraph. But if we stick till the end of the life of this article, we are going to at least find out where to get help setting up these conversion tracking codes and whether CPA is beneficial for your business model or not.
That’s right! Google doesn’t make it very easy for an average user to benefit from its CPA strategy.
Let’s talk about some interesting stuff before we all fall asleep. Typically, Google needs to see that currently, you’re getting enough traffic from your Google CPC campaign to your website.
How do you do that? By making sure your budget is getting you at least 200 to 500 clicks each month first and for most. You also want to make sure that you have a solid CTA (Call-To-Action) on your website.
Let’s find out the most common CTA criteria. In most cases, either you are selling products or services and accepting online payments on your website. OR, you just want people to come to your website and find useful information.
In the first instance, where you are accepting online payments on your website in exchange of the products and services you offer, you have to let Google know that when a user comes to your website, a specific product or service is acquired.
How do you tell Google about this? In most cases, a lot of webmasters create a “Thank You Page” which is only accessible once the user has made the payment. Once the payment has been made, only then, the user will be redirected to the “Thank You” page.
By doing this, you are creating a properly channeled traffic funnel that will later be used to define tracking on Google Ads platform. This way, Google is going to learn how exactly users are being converted on the website and will start tracking in order to see whether you qualify to use the CPA strategy or not.
In the second scenario, where your website is offering information and you only require users to fill up a submission form. Keep note, online payments are not being accepted in this case.
Now this form could be just a “Subscribe to Our Mailing List” or a “Get a Quote Now” form.
That “Thank You” page is going to be very handy in this case as well. Create an additional page where users will be redirected once they submit the online form.
There you go! you have just learned how to create a proper channel for your users which may look like this;
Clicked on the Google Ad à Got the information on your website à Filled up the form à Redirected to “Thank You” page
Now comes to technical part! Read this short “2 step” article on how to setup tracking code on your website.
Congratulations! You have successfully setup the conversion tracking on your website.
Even if you change your mind and decide not to use to Google CPA strategy, at least you will be able to see exactly how many people have been converted on your website.
Let’s talk about the big elephant in the room…! How much Google is going to charge you for CPA Ads?
CPA costs much more than CPC or PPC. However, the good news is, you only pay whenever a conversion or acquisition has been made.
How do you find out your CPA (Cost Per Acquisition)?
Unfortunately, you cannot find out an exact CPA value before you start a Google CPA campaign.
As strange as it may sound, CPA value is determined based on your competitors. For instance, If your competitor is paying $15/acquisition, you have to pay similar amount to for each conversion.
Is it worth the hassle ?
Let’s find out! There are a few simple formulas to find out whether Google CPA is for you or not.
1. If you sell online merchandise here is what you need to do;
Find the value of X.
A – B = P
P – RP(Remaining Profit) == X
A == Product Price
B == Product Cost
P (Profit) == A (Subtracted by) B
X == P (Subtracted by) RP
A == $100
B == $40
$100 – $40 == $60
P == $60
Now comes the fun part; How much are you willing to pay Google per acquisition?
Let’s say your answer is $20 maximum out of your $60 profit.
The value of X becomes $20.
RP or Remaining profit becomes $40.
It is recommended to begin the CPA campaign with the maximum CPA bid value of 50% of the value of X. With that said, your initial maximum CPA bid should be not more than $10 per conversion. After 5 to 15 days of learning period, Google will tell you whether $10 per conversion is working or you need to increase the maximum CPA value and you can gradually make your way up to $20 per conversion.
2. If your conversions are based on “Get a Quote” or “Signup for Our Mailing List” Form, here is how you can find out your CPA value:
Heads-up: Knowing your current conversion rate is going to be helpful.
Find out your conversion rate: If 5 users out of every 100 that are filling up the form are converting and becoming a sale. Your conversion rate becomes 5%.
Let’s jump to the formula, shall we;
Let’s suppose the average value you receive of each form is $400 and your conversion rate is 5%.
Each submitted form must cost you less than 5% of $400(or the value of each form) to break even which is $20/form submission.
100 form submissions will cost you $2000 @ $20 per form submission. Based on your 5% conversion rate you are going to convert 5 forms out of 100 which brings the value of
5 x $400 == $2000 in revenue. This means you are breaking even.
Now you know, each form must cost you less than $20 to make any profit. Similar strategy applied here as well. It is recommended to start the Google CPA campaign with the maximum CPA bid value of $10 (50% of your break-even value) and make your way up or down based on how much Google determines the CPA bid value to be.
We are all done!
Acknowledging, running a Google CPA campaign is much more complex than a traditional CPC or PPC campaign, however, most businesses generate rather higher ROI with this strategy.
It is strongly recommended to seek professional help by Google Certified Experts only when it comes to running Google CPA campaigns.
Happy Google Adword-ing
Research ==> Strategize ==> Implement ==> Evaluate ==> Repeat