CPC campaigns, PPC advertisements, or CPM email marketing are some terms you have probably heard of before. But what exactly do they mean? How do you compare them? As you keep reading, you’ll learn about all the basic aspects of the metrics and even give you some tips on how to use them for effective cost management.
The Difference Between CPC and PPC
The cost-per-click (CPC) and pay-per-click (PPC) metrics both perform on the same terms and are interrelated concepts. However, the slight difference in their names suggests a slight difference in what the two terms stand for.
The difference between PPC and CPC explained
CPC is a metric used to measure the general cost of each advertisement click for the campaign. While the PPC isn’t a metric, it’s an advertising method where advertisers pay a defined amount each time their ad gets clicked.
In the case of these two pricing models, the advertiser gets charged every time the advertisement is clicked on, disregarding the number of times it was actually displayed. However, users who reached the advertisement are not expected to complete the conversion, sign up, or make a purchase.
CPC formula = Total Cost/Number of Clicks
The Cost-Per-Mile (CPM) Metric
The cost-per-mile (CPM) metric charges the advertiser for a display rate, meaning every 1,000 displays have a flat rate charge, and it doesn’t change if the advertisement generates any engagement.
Source: LinkedIn
Now, this pricing model is much cheaper but implies charging for unengaged views, which is why it’s most suitable for display and branding-oriented campaigns. The protocol does include a guaranteed number of impressions based on which the price is set.
CPM formula = Total Cost of Campaign/Total Cost of Impressions
How To Use These Models In Different Scenarios
CPC and PPC or CPM are both completely good metrics. However, they aren’t the same, meaning each model works better in different situations. Before choosing, estimating your budget, analyzing your expectations, and comparing the actual models is vital. Here are several cases in which the two models differ and perform quite differently.
Strategic Cost Management
CPC offers a greater payoff rate than CPM, which can be important for those on a budget and with a cost management plan. The reasoning behind this is that you reasonably pay for each engagement rather than paying for ad placement.
However, CPC has a better return on investment if advertisement clicks convert to sales, and then the cost of a click is covered by the revenue from each purchase. In the event that clicks don’t convert into sales, a CPM model is a friendlier budget option for advertisement awareness.
Brand Awareness
Speaking of advertisement awareness, CPM is the better option for brand awareness. A brand with an undefined audience looking to put a word about itself in the market should stick to the CPM model, which enhances brand awareness for a reasonable price. In fact, 70% of brand marketers list building brand awareness as their top priority for social media.
The CPC or PPC models are a finer option for those with a coordinated target audience; the ads can then be placed strategically.
Marketing Insights and Analysis
CPM marketing insights are rich in analysis. For example, CPM email marketing can show you the most successful advertisements and establish your audience of interest. Statistics claim that audience segmentation is one of the top three tactics used by marketers in email marketing. Therefore, with the help of information about engagement, advertisers can segment their audience for better results.
Advertising Pace
Some advertisers aim to maximize their target audience, while others just need to reach as many users as quickly as possible. Now, depending on your situation, you need to choose a certain model.
Tracking CPC and PPC, you will realize they take a little longer than expected to reach a desired engagement rate. While the CPM model presents advertisements to a load of users at once, this doesn’t guarantee that many will engage, but you will definitely raise your brand awareness with the CPM model.
Risks
CPM, CPC, and PPC advertising all carry financial business risks. How exactly? Well, a CPC and PPC model only charges for clicked-on advertisements, but that doesn’t guarantee that the user will truly engage with the advertisement. If many click out, then the revenue won’t cover what you spent on the ad.
A similar problem applies to the CPM model, which reaches many users with the probability that some will actually engage, but it doesn’t always turn out like so. The campaign might not be relevant, or the timing isn’t right, and there you have it — a waste of management costs.
Proven Tips for Effective Cost Management
Here are some tips for effective cost management and choosing between the CPC/PPC and CPM pricing models:
- Consider the potential of your ads. If you are certain of the success of your ads, then you should opt for the CPM model, which will reach a wider audience and generate clicks thanks to its visual appeal. In fact, three-quarters of businesses claim that their marketing campaigns directly affect their overall revenue.
- Determine your advertisement goals. CPM advertising is the route for those looking to raise brand awareness and get the word out about a limited offer. Whereas a PPC campaign is better for turning campaign clicks into sales.
- Evaluate the cost of the product. Companies with a limited budget should stick to the CPC and PPC models, which will most likely convert clicks into sales, covering the cost of advertisements. Companies with the extra money to spare on brand awareness should use the CPM model, which will raise awareness but can produce very few sales.
- Focus on website optimization. It takes half a second for a user to form an opinion about your website. So, if you know that your website isn’t in its best state, you must choose the CPC model that is better at converting clicks to sales. Only use the CPM model when you have a well-displayed, attractive, and eye-catching website.
Summing Up: Tools for Top-Performing Ads
CPC, PPC, and CPM models are substantial tools for business advertisements. However, just like any other tools, these require a deep understating and business analysis to choose which will work best for your campaign. For those just starting, don’t be afraid to mix and test these models until you find your perfect strategy.
Author Bio:
Victoria Berezhetska is a Content Lead at Phonexa. Victoria has a degree in Bachelor of Science in Business Administration with extensive working experience as a PR specialist and content writer, touching on many different areas of digital marketing. In her work at Phonexa, she covers a wide range of topics, including call tracking, lead generation, marketing automation, and so much more.
