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CPA is not what I thought it was?

Visitor ✭ ✭ ✭
# 1
Visitor ✭ ✭ ✭

I tried a CPA strategy on a new campaign which according to what I've read "AdWords will try to keep your cost per conversion equal to the target CPA you set."

 

Well that's not happening. The math doesn't add up.

 

My CPA was set at $22.  With a conversion rate of 0.5% (tracked over 2 years of data - narrow market demographic)  this means I must get about 200 visitors in order to have a conversion.  This means my CPC should be about $0.11 (200 x $0.11 = $22)

 

However my REAL CPC is $1.67

 

What gives?  

2 Expert replyverified_user

CPA is not what I thought it was?

[ Edited ]
Top Contributor
# 2
Top Contributor

Hi @Alcon K,

 

With Target CPA, AdWords uses a target cost-per-acquisition (CPA) that you enter, and automatically sets bids to help get as many conversions as possible. While you are pretty correct in calculating the value your average CPC should be provided you continue to accrue the same CR, it must also be factored in that some search terms keyed in by users combined with specific ad positions of yours may have a much higher probability to convert whereby they may justify a much higher bid. Another thing for thorough consideration is that the Target CPA bidding strategy typically needs quite a few days or even a bit more till the algorithm learns the ins and outs and various factors get aligned to ensure profitable workings going forward.

 

The above said Target CPA bidding strategy is usually a very powerful weapon able to max out your revenues in the medium and long term, however, you are advised to refrain from it if you are not in a position to suffer some short-term losses.

 

Enhanced CPC (ECPC) is similar to your strategy in many respects, just that the transition is smoother. I strongly recommend you consider opting in to ECPC instead Target CPA. Please for more, refer to the below link:

 

***   Target CPA bidding / para #4   ***

https://support.google.com/adwords/answer/2390684?hl=en

 

Best,

Lakatos

CPA is not what I thought it was?

Top Contributor
# 3
Top Contributor

@Alcon K,

If you have recently enabled the Target CPA in your campaigns, you may have to wait some days. It takes sometime to establish the campaign. In the mean time, you need to be very careful on your search terms. 

 

 

 

--Rakesh Kumar, AdWords Top Contributor , Twitter | Linkedin | Community Profile
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CPA is not what I thought it was?

Visitor ✭ ✭ ✭
# 4
Visitor ✭ ✭ ✭

When you say "REAL CPC" do mean average or what the system is showing as a max CPC?

CPA is not what I thought it was?

Top Contributor
# 5
Top Contributor

@Dyana Q, my working assumption was that "REAL CPC" in the first post refers to the amount charged by Google and not the bid set by the advertiser. Else the query would not be coherent.

 

Lakatos

CPA is not what I thought it was?

Visitor ✭ ✭ ✭
# 6
Visitor ✭ ✭ ✭

Thank you Lakatos,

 

Yes I am referring to the amount charged by Google in this case.  It is my "Average CPC" for the campaign.  

I've segmented my adwords pretty carefully and I have a number of under/non performing ones that I will cull out.    I understand it will take a while for the system to learn the strategy, but given they have my analytics data, I would have thought that my conversion rate would have been used to set a baseline.  Perhaps I'm giving it too much credit.  Smiley Happy

 

I'll check out the alternative strategy you suggested. I am really not well versed on this process and trying to be careful of runaway costs. We've been running shopping ads for 6 months without much success, but its cheap enough that it's worth the brand exposure and placement.

 

CPA is not what I thought it was?

Visitor ✭ ✭ ✭
# 7
Visitor ✭ ✭ ✭

Average CPC as displayed.  Thanks!  (So what Google is actually charging me per click)

CPA is not what I thought it was?

Top Contributor
# 8
Top Contributor

>>>   I am really not well versed on this process and trying to be careful of runaway costs.   <<<

 

That's what I thought. I like your approach. As @Rakesh Kumar says "In the mean time, you need to be very careful on your search terms.", with Target CPA strategy. If you switch strategy you'll face less initial risks.

 

Lakatos

CPA is not what I thought it was?

Visitor ✭ ✭ ✭
# 9
Visitor ✭ ✭ ✭

Can you elaborate on "being careful on search terms?"   I assume this to mean "Leave out search terms that are only loosely relevant"  but since I don't know what I don't know, I don't want to assume much.  

 

I haven't had to use much advertising as we're typically #1 organically in our market, but with some new product introductions and trying to expand our product line, I need to start getting educated.

 

Many thanks for your helpful responses.

CPA is not what I thought it was?

Visitor ✭ ✭ ✭
# 10
Visitor ✭ ✭ ✭

So I think the Average CPC can be deceiving because it's not taking into account all of the impressions you had and the bids for those. Google is changing the bid based on a variety of factors and they may have had signals to increase for those searchers that clicked where they decreased for other searchers that did not click.