By Dennis Last update August 11, 2017 Comments: 2

how-to-keep-cpcs-sane-holiday-edition

The holiday season always shows up earlier than you’d like it to.

All those to-dos that kept getting postponed, till we’re here, on the verge of the busiest time of the year for most stores.

And while it’s too late to make drastic changes, there are still things you can do to get the most out of this years holiday sales.

Here are a couple of ideas:

  • A Santa hat on your logo might be funny, but if you’re short on time, focus on things that will move the needle.
  • Think about which offers you’ll push forward on your homepage, email campaigns, product recommendations, blog, etc.
  • Start preparing the emails you want to send out. Having them ready to go will save you lots of stress.

While the above recommendations are pretty broad, in this post we’ll take a look at what changes you can make to your advertising campaigns. As always, the goal is to get a better return for the money you put in!

The Rise of the CPCs

If you were struggling with getting your advertising profitable before the holiday season, then you’ll have a very hard time getting there over the next couple of weeks.

In online advertising, the holiday season kicks off around early October. You can see that  in the costs per click (CPCs) you pay on the different platforms. They start going up.

holiday-trend-cpcs-commerce-adwords
Research from the 2015 holidays season clearly shows the jump in CPCs across most categories

Why are they going up?

Most advertising platforms like Facebook and Adwords, work like an auction. And if there are more advertisers for the same amount of space, the prices go up.

The cost per click (or CPC) is and essential component of the price your paying for each sale (CPA). If the cost for each click goes up, you’ll end up paying more for each sale.

Math time

Example: your campaigns are (barely) profitable with a CPA of $12 and a CPC of $0.4

Formula:

Number of clicks X CPC = CPA

x * $0.4 / click = $12 / sale

x = you need 30 visitors visitors to make one sale

If during the holiday season the CPC goes up by 30%, which isn’t unlikely, let’s see what happens to the cost:

30 visitors * ($0.4 + $0.4*30%) = $15.6 / sale

So if $12/sale was your break-even point, you can’t afford to pay this increased CPC.

Your options are either to pull out or find a way to lower your CPC.

The Idiot’s Way Out?

This is a controversial topic. Because many store owners are convinced they have to be there. It’s THE shopping period and everyone has their wallet out, so you would be an idiot not to try everything you can to get customers.

shopping-season-wallet-out-traffic

But if you are planning to use advertising to drive all of your traffic, the math has to make sense. There is no point spending on ads to drive sales if you’re losing money on every order. Especially because as we get closer to Black Friday, Cyber Monday and the Christmas shopping period, CPCs are going through the roof and things will get even more expensive.

Some established businesses have a system in place that allows them to lose money on the first order, but then make up for it on repeat orders. But that’s a risky and expensive game to play, especially is your store is new and unproven.

But it doesn’t have to be all or nothing. Some campaigns on some platforms might be widely profitable (keep them), while others are losing you money. For one of our clients, we’re putting all chips on Google Shopping this holiday season, because the other platforms are already too competitive.

Or maybe you need to go down to the specific product categories or brands and see which are bringing profitable sales.

You can also go deeper down to the product level. But to do that you’ll need need solid tracking in place.

If you’re still down to play this holiday season, let’s see how you can do it intelligently.

Lower Your CPC At All Costs

While the market pushes the cost up, there are a couple of things you can do to make your campaigns better and drive the cost back down.

We’ll look at how to do this on Google Adwords and Facebook.

Lowering Google Adwords CPCs

On Google Adwords you’re competing with other stores that are going after the same keywords or are pushing the same products.

There are only 4 slots for Search ads and 5-10 slots for Google Shopping results. So you are competing with direct competitors. Meaning that the companies that are driving up the price, offer perfect replacements for your products.

The only way for you to make that work is to get better Quality Scores. This score is Google’s guess of the relevance of your ad for a specific search query. Google doesn’t reveal how this score is calculated, but the ad clickthrough rate is one of the biggest factors.

adwords-quality-score-lower-cpc

So the key to lower your cost on Adwords is by grouping your keywords together and creating better ads for those ad groups.

These things can be time intensive and you might not see an immediate return from your efforts. But try to make your ads a tiny bit better and get your quality scores up.

Research has shown you need to score at least 6/10 to start getting significant benefits.

 

Besides lowering the cost per click, have a close look at all of the keywords in your account. And try to pause a few that are mainly costing you money and not generating a return.

On Google Shopping you can look at your different campaigns or products groups and see which ones make sense.

Lowering Facebook CPCs

On Facebook, CPCs are also calculated through and auction.

If you are a jewellery brand and you want to reach women between 25-35 and there is a lifestyle blog that also wants to reach this same demographic, you’ll compete for the same people.

So the competition is on the level of the audience and not necessarily on the level of the specific offer or product.

Facebook wants its users to spend as much time in its apps as possible. That’s why it rewards good ads (= if people click, like, share or comment) with a lower cost per click. In the Facebook interface you can see this via the Relevance score. That’s a score between 1-10, the higher the score for a particular ad is, the less you’ll pay for each click.

facebook-ads-relevance-score

So to make your clicks cheaper, make your ads better or pick an audience that’s a better match for your ads. The same ad will show very different Relevance scores depending on the audience.

If you’re running multiple campaigns or funnels on Facebook, take a look at the ones that are very profitable, barely profitable and losing money. Pause accordingly!

To summarise, costs will continue to rise and it’s up to you to keep a close look on your campaigns to see which ones need to be paused and which ones you can still work on.

Got other strategies or rules of thumb rule that you use? Share them in the comments!

About the author

Dennis

Dennis is the main guy behind Store Growers. He's never had a job that he didn't invent himself and loves that freedom.
In writing articles, creating courses or working with ecommerce clients he has one goal: to create more freedom for online store owners.

2 responses to “How To Keep Your CPCs Sane (Holiday Edition)

  1. […] are searches for the categories, problems or solutions. But these clicks can get expensive. So you need to make sure that your bidding strategy reflects the real value of these […]

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