Chapter 66
Cost Per Click

To understand the cost per click (CPC) of the marketing programs designed to generate word of mouth (WOM).

Two approaches to determine CPC will be discussed.

CPC is the price paid for an internet advertisement on a per click-through basis. Websites that offer online advertising have simple pricing structures. For example, consider a campaign where payment is based on the number of times a banner is clicked. Clicks are sold for $.10 per click. Hence, if there are a thousand clicks per week on the banner, the total amount payable to the website for that week would be $100.

Approach 2: Cost Per Clickwom

Where

CPC = cost per click

WOM = word of mouth (based on Chapter 63)

How: To determine CPC, the marketer divides the total cost of the online marketing campaign by the number of direct clicks. The result is then divided by the WOM calculation.

Example: Let’s assume the campaign cost $50,000 and generated 100,000 direct clicks. Simply plug in the numbers as follows:

From Chapter 63, we know that WOM = 4.8. Completing the calculation yields the following result:

Therefore, the Cost Per Clickwom equals $0.104 or 10.4¢

When compared to the CPC of $0.50 or 50¢, the Cost Per Clickwom is cheaper on a per click basis, suggesting that the WOM campaign was cost effective.

An important aspect of social media marketing is getting community members to share positive WOM that ultimately leads to clicks. This effort involves both financial and time investment. Each advertising media has different pricing and payment conventions. Print and broadcast advertising, for example, cost advertisers less as they buy more print ads or airtime. Payment is usually upfront, meaning that the advertisement will not be placed until the advertiser has paid the media vehicle in full for the use of that space. Web advertising is most often in the form of banners, interstitials and links (referenced in Chapter 53, Click-Through Rates). Marketers know how to measure the effectiveness of these ads using click-through rates, so now they must determine how to measure the cost of these ads.

Generally speaking, advertisers must weigh costs with each media vehicle chosen. Online advertising is a simple approach, although the costs are not always obvious, since predicting the actual number of user click-throughs is difficult. Advertisers have faced the unfortunate side effect of competitors who repeatedly click the online ad, just to increase the cost. Since per click pricing is relatively cheaper, a competitor has to be devoted and persistent to drive up the costs. Fortunately, most online websites have software tools that can determine if click-throughs are following a repetitious pattern, so that advertisers don’t pay for these types of clicks. Marketers should ensure the website they have chosen has user statistics that provide guidance on the audience type. This helps marketers determine if the site reaches the desired audience.

CPCwom estimates the CPC with WOM, showing marketers how much less per click it costs using WOM incentives than marketing designed to motive direct clicks from target customers, providing a clearer sense of the CPC for all clicks, direct and WOM. This helps determine if a WOM campaign is maximizing its potential. If the result of the calculation is less than 1, then the campaign is considered successful.

iMark Jeffrey, Data-Driven Marketing: The 15 Metrics Everyone in Marketing Should Know (John Wiley & Sons 2010), 185; Word Stream, Cost Per Click (CPC): Learn What Cost Per Click Means for PPC. Retrieved May 2, 2017 from http://www.wordstream.com/cost-per-click; Chris Leone, What Is a Good Cost-Per-Click (CPC)? Webstrategies, May 24, 2016. Retrieved May 3, 2017 from https://www.webstrategiesinc.com/blog/what-is-a-good-cost-per-click-cpc