PPC advertising can feel like a scary world to venture into—after all, you’re spending precious dollars. But the fact of the matter is, you have to spend money to make money, and the good news is, digital platforms give us tons of data to work with so we can identify what’s worth our money, what’s not, and how to get more for each dollar we spend.
Not to mention advertising benchmarks that help us know what to strive for.
In the case of Google Ads, we have lots of metrics to help us out, and one of the most important ones when it comes to costs is your cost per lead. Read on to learn what it is and how you can lower your cost per lead so you can actually be sure that you’re making money with the money you spend.
Cost per lead is a PPC metric that tells you how much it costs for you to generate a conversion from your ad(s). A conversion is whatever action you want users to take from your ad, whether that’s to book an appointment, download a guide, submit a contact form, make a purchase, or something else—so it makes sense that cost per lead is also known as cost per action or cost per conversion.
The cost per lead formula is cost / conversions. If you spend $500 on a campaign and get 50 conversions, your CPL is $10.
Given that formula, lowering your CPA means finding out where you can increase conversions and/or decrease costs. But it’s not exactly that black and white.
First of all, any given Google Ads account likely has multiple campaigns and multiple keywords—each one varying in how much value a conversion brings to your business. Then there are other factors like the maturity of your campaigns and conversion rate optimization efforts, your overall budget, and the resources you have.
What constitutes a “good” cost per lead varies widely depending on which industry you’re in. For example, the average CPL for the Furniture, Career/Employment, Legal, and Business Services industries is over $70, while for Automotive Repair/Service/Parts and Animals/Petes, it’s less than $20.
You can view all our online advertising benchmark data here.
As I just mentioned, there is no prescriptive formula for lowering your cost per lead that works for every account. Yes, it's a matter of increasing conversions and/or decreasing costs, but there are several ways to go about each of those. We're going to run through those now.
One way you could lower your costs is by lowering your bids, and this comes down to your "limited by budget" campaigns. “Limited by budget” is a campaign status in Google Ads that means that your bids are high enough to make you eligible to enter a certain number of auctions, but that you don’t have the budget to appear in that many auctions.
For campaigns with this status, you could:
If one of your higher CPL campaigns is not limited by budget but is a high-value campaign, you can look to lower bids/budgets in lower-value campaigns to bring down your overall CPL in your account.
💰 Want more Google Ads budgeting tips? Free download >> The Easy Guide to Google Ads Budgets
💰 Want more Google Ads budgeting tips?
Free download >> The Easy Guide to Google Ads Budgets
A lower bid can lower your cost per click, which in turn lowers your overall CPL. But how can you win the Google Ads auction with a lower bid? With a high Quality Score. The way the Google Ads auction works is, Google rewards quality ads with lower costs per click.
To improve your Quality Score, you need to understand its three components:
✴️ How does your Quality Score compare to others in your industry?
Use the Free Google Ads Grader to get insights on your Quality Score, impression share, wasted spend & more.
Your account structure refers to the way you organize your keywords and ads into ad groups and then those ad groups into campaigns. A proper account structure is important in reducing CPA in a few ways:
Take a look at your campaigns and make sure you’re not leaking any spend on campaign settings or targeting. If you're using Manual or Enhanced CPC bidding, you can make bid adjustments based on:
If a particular time of day, network, location, or device is lagging in conversion rates, exclude those segments or adjust your bids accordingly.
If you're using an automated bidding strategy, your ability to adjust bids is much more limited, but you can adjust your targets. For example, if you're using the Max Conversions bidding strategy, you can set a target CPA (tCPA).
If you know what a conversion needs to cost in order to be profitable, setting a target CPA is a great way to control costs.
Just make sure you set a realistic target. If you set your goal too low, Google may have a hard time finding auctions that meet those conditions—this can result in fewer impressions, which can lead to fewer clicks and eventually fewer conversions, which will hike up your CPL.
As mentioned in tip #3, having an optimal account structure allows you to more easily detect patterns in keyword performance. Here are some of the patterns to look out for and what action you can take for lowering your CPL.
If you’re targeting the right audience with super-relevant ads and landing pages but not seeing conversions, you may need to do some landing page optimization. After all, you can have your landing page best practices in place that meet Quality Score requirements—relevant, useful, loads quickly—but also have room for improvement. There are a number of options can you test out and optimize, including:
The last strategy for decreasing your cost per lead in Google Ads is to make sure your conversion tracking is in good shape. That means:
You can also use our free Google Ads Grader to see if you're making any other costly mistakes with your account.
As you can now see, lowering your cost per lead in Google Ads doesn't just come down to one particular action or campaign, but rather a mix of adjustments throughout your account depending on which campaigns have the most value, have room to grow, or room for improvement. Take a look at your campaigns and see which strategies make the most sense for your account.
To recap, here are the eight ways to lower your cost per lead (or cost per action) in Google Ads:
Kristen is the Senior Managing Editor at WordStream, where she helps businesses to make sense of their online marketing and advertising. She specializes in SEO and copywriting and finds life to be exponentially more delightful on a bicycle.
See other posts by Kristen McCormick
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