CPA vs CPC – Which one is the Best?
CPA vs CPC, let’s start with the basics of CPC. CPC is cost per click which is a common model of measurements for cost. In CPC, a click has a specific value. When someone clicks on the advertisers Ad then that generates revenue. Moreover, the advertisers have to pay for their Ads. Now keep in mind that there is no cost involved in displaying Ads. The advertisers only need to pay for the clicks they receive on their Ads via some platform. That may be a website or a social media group where organic traffic is in high intensity.
Most people confuse CPC with PPC. They are not the same. They are actually two different things. To determine CPC, you need to take the complete cost of the advertisement campaign. Afterward, divide that total cost by the number of click you receive on each Ad. This determines the total CPC amount. Search marketing companies use this strategy and model to deduct the performance of your advertisement campaign. In SEM, you need to bid for the top spot. The payment directly goes in the SEM banks. The results of this strategy yield more organic visitors. The revenue is significantly more than the cost on Ad.
CPA is cost per acquisition. CPA has advantages over the CPC advertising model. For example, you spent a $100 for 100 clicks. This means that 1 click would cost a $1. But what if you only get 1 click and that costs a $100. There is no return investment. Meaning that a customer will buy something from you for $100. However, you were aiming to get 100 clicks for the $100 you spent on the Ad. So, while discussing CPA vs CPC we talk about control. CPA offers more control over when it comes to return on your investments on the advertising campaign.
Suppose you want a customers that spends $100 with your business via the Ad. However, you do not want to spend more than $20 on an Ad to get that $100 customer. You have a total of $100 and you can get 5 $100 customers that will generate a revenue of $500. So, you can see the difference.
CPA uses tracking tools and reporting tools that help to analyze the click status of potential customers. Moreover, you can also adjust the CPA by using the proper tools and keeping an eye on your visitors.
So, what if you receive clients that are willing to spend more than just a $100? Getting a profit of $100 sounds great with a $20 Ad. Therefore, if the clients are ready to spend more than a $100 with your business then what? Then you need to increase the price of your Ad as well. If you are getting $100 from a $20 Ad then imagine the revenue while Ad costs a $100.
The search engines charge the advertisers on CPC model. This is how the advertising market operates. But reducing the cost of CPC while getting the best out of it is more than possible. CPA allows you to track the clients. So, you will have an idea where the customers land the most.
Difference between CPA vs CPC
CPC measures cost of a single click on an Ad. The calculation is pretty simple. Divide the total amount of money you spent on Ads by the amount of click you got on that Ad. The results will show the exact CPC.
CPA is basically related with the customers. CPA calculation is simple as well but you need to understand the basic concept. Suppose, you have spent $200 on an Ad and the number of customers you got were 20. Out of those 20 customers 10 bought something of value ($100) from your business. So, the total Ad cost was $200 and the customers spent $1000 total. Then you got the revenue of $800 from that Ad. Pretty simple right? Now to calculate CPA divide the total amount of running your Ad by the successful customer transactions via that Ad. This gives you the exact digit of CPA.
Which one to choose? CPA vs CPC
Professional digital marketers can utilize both models in coherence to achieve the ideal success rate. It all depends upon the strategy a marketer uses. Moreover, with CPA the chances of success are even higher. This is because CPA campaigns are directly related to success.
Once there is enough data on the engagements of the customers then CPA can do its job. But remember, if the CPA is higher in number then your business in losing money. In the above example the CPA should be round about 0.25. If it is 1 then you are making the same amount of money as you are spending on the Ad. If it is greater than 1 then your business is losing more than it is making. Even if you are making huge profits when CPA is greater than one you are still losing money. Make sure that the number stays below 1 to ensure positive revenue.
Moreover, CPC can also help in gathering information for CPA. With CPC analytical data, you can determine which of your Ad receives the most customers. Clicks eventually lead to conversations. So, then you can spend less on other Ads and more on this Ad to secure customer conversations.
How to Reduce CPA? CPA vs CPC
If the CPA is higher you need to lower it down by using tools like hotjar or Unbounce etc. Otherwise, your advertising campaign will be really difficult. Hire a professional marketer to ensure a safe and smooth advertising campaign.
For more information on CPA vs CPC feel free to contact us. Also, if you have any question regarding CPA or CPC then our professionals are ready to guide you to success.