Loading ...
Using cost per lead as your PPC success benchmark? If so, you are more than likely:
- Missing out on additional conversion volume and revenue.
- Wasting a significant percentage of your budget on keywords/placements that generate zero revenue.
- Introducing campaign complexity that adds zero value.
Prior to joining PPC Associates, I spent a number of years working in the EDU SEM space. While the following example uses EDU, the issues discussed here can apply to almost any PPC program that’s using CPL as a way to measure effectiveness.
Anyone who has worked in EDU knows that it’s driven by CPL. CPL is the price model the vast majority of EDU companies use to buy leads from external sources and measure performance of the PPC channel. On the surface, it makes sense and makes things easy for people to manage: generate X number of leads at X CPL, convert X percent of them into students with X revenue per student, and tally up the profits. When you roll it all together in a spreadsheet and don’t dive into the details, it looks like a decent way to run a business, EDU or otherwise.
For example, let’s assume you have an AdWords campaign that includes 20 keywords. You’re running to a $60 CPL goal. Take a look at the following data*:
*all data in this post is fictional and is for illustrative purposes only
If you just looked at the bottom line, you could call this a win. At $37 and change, you’re well below the CPL goal and have more than likely overachieved in terms of your lead goals. If asked, you would probably say that keyword 8 was one of the best performers: great volume and low CPL. You would probably look at the terms converting at a CPL well above goal (highlighted) and make adjustments – bids, landing page testing, etc. You might even just cut some terms altogether given their CPL delta from the stated goal. (Keyword 9, with a $1,000 CPL, jumps out as a primary target for a cut.)
Now take a look at the same numbers with revenue added in:
Still feel the same way about keyword-level performance? Your “best” keyword, #8, is actually a total loss, and the “worst” keyword, #9, is actually one of the best performers in the portfolio! Looking at the details, especially the highlighted keywords that were being setup for some optimization (likely bid reductions to align with CPL goals), you can now see the issue. Without visibility into the revenue associated with the keyword that delivered the lead, you’re optimizing with your eyes closed. You would have made adjustments that, while they may have helped hit a CPL goal, would have more than likely generated less revenue for the same spend. Depending on your margins, the overall spend/revenue may still work, but it would be far from what I would consider to be an optimal use of budget dollars. The dollars spent on keywords with no revenue could have been allocated to more profitable keywords (better positions) or other channels altogether.
Pure dollars aside for a moment, a CPL-focused approach can also introduce a number of other inefficiencies: time wasted by in-house PPC staff or a PPC agency on campaign and keyword changes that can produce the opposite of the intended effect; time wasted by the lead-qualification teams calling, emailing, and following up with leads that have little chance of converting…resulting in lost opportunity. (How many sales did the lead-qualification team miss because they were busy dialing 1,000 leads with zero chance of converting while leads with a better chance of converting were going cold/buying elsewhere?)
When I started working on PPC accounts back in the Stone Age, CPL was a pretty valuable metric. The technology to map offline conversion data to individual keywords didn’t exist, and the notion of being able to use that data to guide automated bidding based on an ROAS constraint, while interesting, seemed to be years and years away. Fast forward years and years to the present day, and not only does the technology exist, it’s relatively simple to implement, offers other critical features (attribution), and won’t break the bank.
There’s just really not a good reason to use CPL as a success metric any longer. Its time has passed. If CPL is the only way you’re optimizing your PPC budget, your time will soon pass as well. It’s been fun, CPL, but it’s time to part ways.
- Jeremy Mayes, Account Executive
[...] Why Focusing on CPL is a Really, Really Bad Idea, PPC Associates [...]
[...] Why Focusing on CPL is a Really, Really Bad Idea, PPC Associates [...]
Good one, Jeremy. Whether you match up the data and drive bids in an automated fashion or do it manually, you still need to get to revenue data – or figure out a good proxy for revenue data – one way or the other. I’d guess you even did this in the stone ages – manually, by passing a keyword variable along to the CRM so you could match revenue (or other value proxy) to keywords, yes?
Hi Terry,
Thanks for reading / your comment. What you wrote makes perfect sense and one would think, regardless of how it was being accomplished, revenue was being attributed to keywords. In my experiences in was not happening that way and based on the time I spent in the industry I would say what I saw was not at all unusual. The EDU space operates more like B2B that it does B2C. Long sales cycles and the real conversion takes place offline. Given these challenges what I would typically encounter was one of two different setups:
1. “Big bucket” tracking. Data would be looked at at the almost the highest possible level..AdWords, adCenter, Yahoo, etc were viewed as single lead sources. More often than not TM was blended with non TM and search was blended with content. Sometimes it was taken a step further – maybe by separating TM & non TM and search and display but that was about as far as it would do.
2. Keyword level tracking that did not track match types, and, was looking at the keyword not the actual query. Smaller version of “big bucket” and still never tied directly to revenue.
None of this was ever mapped to actual revenue. Sure I saw it tied to application rates, conversion rates, start rates, etc but it was never tied to actual revenue. Ever. I can say with a fairly high level of confidence that it runs the same way today as it did almost a year ago when I left EDU and joined PPCA.
While I referenced EDU here this is not the only place this happens. I have friends and associates that manage campaigns to CPL/CPA goals without looking at actual revenue and have personally worked on accounts outside of EDU that use the same forms of measurement. Does not at all seem to be uncommon. I think a huge opportunity still exists in a number of verticals for talented PPC practitioners to show companies how to move away from CPL and really start driving profits. If CPL is all you’re looking at you’re leaving opportunity on the table!
[...] Why Focusing on CPL is a Really, Really Bad Idea, PPC Associates [...]
[...] Why Focusing on CPL is a Really, Really Bad Idea, PPC Associates [...]
[...] Why Focusing on CPL is a Really, Really Bad Idea, PPC Associates [...]
[...] Why Focusing on CPL is a Really, Really Bad Idea, PPC Associates [...]
[...] Why Focusing on CPL is a Really, Really Bad Idea, PPC Associates [...]
[...] – Anecdotes — preferably with numbers, which SEMs grab like life rafts. These should definitely be culled from techniques or analyses that we all practice regularly. A great example is this post, from Jeremy Mayes, about why you shouldn’t focus on CPL. [...]