Advertising Strategy
Justin Lugbill
This post originally appeared on Search Engine Journal
As Google Ads has matured, optimizing to decrease cost per acquisition (CPA) has gotten more complicated and left many marketers wondering:
Despite loosening definitions on keyword matching, increased opaqueness (Search Terms report limitations; responsive ad reporting), and increased competition, marketers still have the needed controls to maximize their acquisition efficiency.
This article walks you through the tried-and-true best practices for optimizing CPA.
You’ll also find updated recommendations in light of newer changes to the Google Ads platform such as value rules, enhanced conversions, and modeled conversions.
First, what is CPA?
Google’s definition states that “Average cost per action (CPA) is calculated by dividing the total cost of conversions by the total number of conversions.”
“Conversion” will mean different things to different people.
For B2B, leads are generally considered a conversion.
For ecommerce clients, a sales transaction is typically the conversion.
For upper-funnel branding initiatives, engaged users may be the conversion that is used to back into a CPA.
Prospective customers taking some action of value is the common thread that holds the above together.
I’m not shy in verbalizing my distaste for using benchmarks to measure success. I get the appeal of a hard number to serve as a threshold to answer whether or not digital marketing efforts are performing.
However, my 15 years of direct account management experience has taught me that there are too many nuances for a black-and-white question like, “What’s a good cost per action?”
The foundation of a good cost per action lies in the details of how valuable that action is, and the ROAS you want to hit. To answer that question, you need to work backward.
Mature organizations know the value of their customers and can tell you the customer lifetime value (LTV) for the segments that matter most for their business.
Companies frequently prioritize LTV for new and repeat customers for each core segment the business markets to (e.g., small business, mid-market, enterprise).
Once you have your LTV, you can calculate each action’s estimated monetary value (e.g., a lead) by combining it with the conversion rate for each funnel stage.
From here, you can add a multiplier to factor in the desired level of efficiency (or scale) you are after.
There are several ways to reduce CPA in Google Ads, including:
Let’s learn more about each one.
A well-thought-out campaign structure is essential to driving down CPAs. Why?
Budgets are set at the campaign level, making budget distribution dependent on campaign structure.
When crafting your campaign structure, think through both the audience/keyword theme and the prioritization.
Often, this takes the shape of having tiered campaigns (e.g., high/medium/low priority) for your themed segments (e.g., brand, non-brand a, non-brand b, competitive) so you can funnel money precisely to where you want it to go.
Key Considerations
Properly allocating budget to the campaigns with the lowest CPAs (and with room to grow) is one of the lowest hanging fruits in decreasing your CPAs.
Examine metrics like Lost Is (budget), impression share and abs, and Top of page IS when evaluating how much room a campaign has left to spend.
If those metrics indicate growth potential, evaluate whether there are higher CPA campaigns, ad groups, keywords, or audiences from which you can pull budget to ensure your most efficient campaigns are fully funded.
Key considerations
Aligning bids to your campaign budget is vital to maximizing efficiency.
If you have a campaign constrained by budget—indicated by the Lost Is (budget), impression share, click share, and abs. Top of page IS metrics – you should analyze whether it makes sense to drop your ad group and keyword bids.
Often, even for ad groups/keywords that are converting, it makes sense to drop your bids to capture more clicks and conversions for that same budget.
If you want to ensure you keep bids high enough to stay on the first page of the SERPs, you can pull in a column for “first page bid estimate” to find where that bid floor is.
Keywords are the lifeblood of a paid search campaign, so it makes sense that their optimization is at the heart of improving your CPAs.
It should be in your regular rotation to review what terms are triggering your ads.
To do this, head over to the Keywords tab, then Search Terms in the left-side sub-navigation column.
The goal with Search query mining or Keyword sculpting is to ensure that the broad, phrase, and exact match keywords in your accounts are both relevant and triggering from the right ad group.
On the Relevance front, improving keyword quality can be done by adding new keywords from the Search terms report and adding keywords to your list(s) of negative keywords.
On the Triggering front, ensure the optimal keyword is triggered from the optimal ad group.
If your keyword is triggering from an undesired ad group, add an ad group-level negative keyword to funnel it to the right place in the future.
Key Considerations
Keywords aren’t the only place you can adjust your bids.
Through Google Ads, you can bid up or down for a variety of other dimensions, including:
Key Considerations
While proper keyword research may uncover most terms relevant to your business now, consumer search behavior changes. Realizing and acting on this is imperative to long-term success.
To uncover new opportunities, one should regularly look at Google’s Keyword Planner, the Search Terms Report and competitive intel reports via solutions like Semrush, iSpionage, Spyfu, and SimilarWeb.
Another option? Dynamic Search Ad campaigns, or DSAs.
DSA campaigns are set up based on your website or specific sections and pages on your website. Google scrubs page content and serves up your search ads to individuals searching for content relevant to that page.
These campaigns can be an excellent, always-on way to mine for new, low CPA keyword opportunities.
Key Considerations
Google Ads 101 teaches us that Quality Score (QS) is one of the most important drivers to lowering CPCs. As one of the three pillars comprising QS, ad relevance is critical to reducing CPAs.
When crafting ad copy, one should aim for complete keyword > ad > landing page alignment.
Key Considerations
It is typical for a consumer to require multiple touchpoints to move from lacking awareness to feeling comfortable enough with your brand to purchase or engage sales.
For all-but-the-simplest conversion actions, one should consider deploying a personalized retargeting track based on how the user engages with your website or social properties (including YouTube).
Flow charts are often the best way to conceptualize these retargeting flows. Here’s an example that is B2B specific using specific content themes and an internal lead score to determine which retargeting content they see next.
If your CPA is a closed/won deal, adding personalized touchpoints that speak to the user’s pain points and differentiate your brand from the competition is a great way to decrease your lower funnel CPAs.
Pre-click, an improved post-click (website) experience, positively impacts the Landing page experience score that contributes to QS (which lowers CPCs).
Post-click, improving engagement and conversion rates for your landing pages can be game-changing for both scale and efficiency.
Here’s a one-pager on this subject:
Key Considerations
It’s been possible to integrate both CRM audience and conversion data into Google Ads for a while now.
However, 2021 was when many advertisers finally took the plunge, as the impending “cookieless” future was slated for early 2022.
While Google pushed back that date to 2023, advertisers should still be making data integration one of their top priorities as it can unlock massive growth potential by better aligning bidding with what drives down-funnel results.
On the audience front, you should be working to sync your CRM via Audience Manager. This unlocks your ability to:
On the conversion front, Google’s Offline Conversion Tracking enables you to sync your CRM or push a file via Google Sheet or SFTP for Google to grab and attribute offline conversions (via the URL’s GCLID) back to a Google Ads conversion point.
Automated bid strategies consist of Max Conversions and Max Conversion Value bidding. For both, you can layer on an efficiency target by way of a target cost per acquisition (tCPA) or target return on ad spend (tROAS).
While there are use cases for manual bidding (or enhanced CPC bidding), our agency is increasingly finding that automated bid strategies drive better long-term results than manual methods.
Key Considerations
In recent years, Google has increased the sophistication of the Recommendations section in Google Ads.
These recommendations go hand-in-hand with your Optiscore — a score that Google assigns your campaign and account based on how optimized Google thinks your account is.
Here, Google provides recommendations that span across keywords, ads, bidding, audiences, and more. Within a few clicks, you can identify an opportunity, then act upon it.
Key Considerations
If you head over to Tools & Settings > Conversions, you’ll be confronted with a list of your conversion points. Here, you have a plethora of options that can directly impact your cost per acquisition (CPA).
Here’s a peek at the settings you can adjust via the conversion settings section:
Prioritizing the above four focus areas as you optimize will undeniably lead to continued efficiency gains and lower CPAs.
While the list isn’t exhaustive, it showcases what savvy marketers evaluate when on how best to improve their Google and Microsoft Ads accounts.
My new book, “Average is Losing” is finally here! I created this playbook to help savvy advertisers close the gap between winning and run-of-the-mill paid advertising campaigns.
It’s filled to the brim with the latest strategies, tactics and tips our Closed Loop experts use to help our clients seek exponential growth.
Are you ready to rise above average campaign performance? Start your business on the path to PPC domination today!
– Lance Loveday
