Why A Lower Cost-Per-Click Won’t Always Reduce Your Customer Acquisition Cost

Many businesses consider advertising using the Pay-Per-Click (PPC) model because keywords with a lower CPC can seem to offer a  higher return on investment. Similar to a company’s operational costs, starting with a smaller cost per click (CPC ) can translate into big savings for the key metric, cost per acquisition (CPA). However, there are other factors that should also be considered  when selecting which keywords to target, and at Three29, we take the big picture into account when strategizing how to help each of our clients maximize their return on investment.

How is Cost Per Click Determined?

In Google Ads, the cost-per-click (CPC) of each keyword is largely influenced by competition among advertisers during the bidding auction process. While a lower CPC can sometimes indicate less commercial intent or lower competition, it doesn’t always correlate with lower ROI—context matters. Below is a screenshot from Google’s Keyword Planner tool, which provides estimated CPC ranges for different keywords, helping us evaluate both cost and intent when selecting search terms.

In this example, the bid cost of the keyword “digital marketing” is less than half the price of the keyword “digital marketing agency near me.” An advertiser might very well be tempted to disregard the more expensive keyword to have a lower CPC, but using the more expensive one could actually lead to the end goal of obtaining a lower CAC.

Comparing Digital Marketing Keywords by Intent and Performance

This snapshot also shows that the  average monthly search volume for “digital marketing” is much higher, with  135,000 monthly searches, in comparison to the average monthly search volume of “digital marketing agency near me” at 22, 200. The  significantly higher search volume more than likely includes lower quality traffic such as people wanting to learn more about digital marketing (top-of-the-funnel users) rather than those who are actually looking to hire an agency (bottom-of-the-funnel users). 

In the chart below, you can also see a projection of the overall results and how the cost-per-lead changes between keywords. The reason for the difference in cost-per-lead for various keywords is simply that higher quality keywords convert at a higher rate.

We considered the possibility that the lower CPC keyword could perform better and could therefore lower the CAC, and luckily, one of the best parts about digital advertising is the ability to test, track, and implement what works.

Two Levels Of Conversion Tracking To Find Winning Keywords

Event Tracking

When businesses think of tracking conversions, or any desired action they want people to take on their website, they typically think of recording the event itself. This usually is an inbound call or a form submission. People usually measure such conversions by redirecting successful  form submissions to a “thank you” page or setting up a call extension inside of Google ads.

The Pros of Event Tracking

• You are able to feed and collect conversion data inside Google Ads.

The Cons of Event Tracking

• You cannot measure a true return on advertising spend (ROAS)
• It’s difficult to attribute specific leads to its respective  keyword

UTM Tracking

At Three29, we use an Urchin Tracking Module (UTM) for improved tracking results. If you’ve ever clicked on a link and found it to be exceptionally long, there is likely a UTM attached. This helps our team match each lead with valuable information.

How It Works in Practice

• Step 1: A user searches for “ac company near me” on Google which triggers our ad for our HVAC client.
• Step 2:  The user clicks on the ad and visits the landing page. 
• Step 3: The url for the landing page was originally  hvaccompanyexample.com, but after they clicked on the ad, it read hvaccompanyexample.com/?utm_keyword=ac-company-near-me.
• Step 4:  After landing on the page, the user  fills out the form by entering their name, email, and phone number. 
• Secret to Success: On the backend of this process, our team at Three29 added a hidden field which captures each of the triggering keywords, in this case, “ac company near me.”

Unlike the previous tracking method, by leveraging UTMs, we allow our clients to confirm which leads from Google Ads actually turned into customers and to know which exact keywords made it happen. You can see the data that was collected for one of our actual clients in the screenshot above. 

The Pros of Using an Urchin Tracking Module

• You are able to feed and collect conversion data inside Google Ads.
• You are able to attribute  leads and customers directly back to specific keywords.
• You can measure true ROAS.

The Cons of Using an Urchin Tracking Module

• Setting up UTM tracking takes more time and resources.

Comparing Data

Take a look at a modified version of the previous data table with two columns added showing both the lead-to-close rate and the overall customer acquisition cost.

It’s important to note that if it wasn’t for UTM tracking, it would be easy to assume that the two keyword examples above are generating similar cost-per-lead results $356 vs. $271. However, after matching the acquired customers with the specific keywords that triggered them, a much more significant difference is discernable at $7,113 vs. $2,706.

How Three29 Can Help Your Company Thrive

At Three29 we make it a priority for all of our clients to know and understand their return on advertising spend. This helps them understand  which keywords are the most profitable and then  put their dollars to work in the most efficient manner possible. We focus primarily on obtaining the lowest customer acquisition cost for each company we work with, rather than looking solely at acquiring the lowest cost-per-click, to help promote sustained success over the long run. 

Contact us at Three29 today and together we will create a comprehensive strategic plan to help your business achieve its long term goals.