As the old saying goes, “you have to spend money to make money” — but no one said you have to spend an arm and a leg. In fact, many online advertisers using Google Ads pay more for leads than they really have to. There are many reasons for this, but most of them boil down to issues with audience targeting and conversion tracking. By avoiding these pitfalls, you’ll be able to better target users who are the most likely to turn into customers, allowing you to convert more site visits to leads, customers and purchases and pay less for each one.

The optimal cost per lead (CPL) or cost per acquisition (CPA) for your business depends on average sales sizes and the specific margins you are operating on. CPL reflects the price you pay for online users who qualify as leads by filling out a contact form, calling your business, subscribing to your email newsletter, or taking another valuable action you assign. CPA, on the other hand, reflects the cost to acquire one new customer, whether that’s a user of your product, or an individual purchase.

If you’re not sure what your target CPL or CPA should be, you can get started by looking at the figures you do know. For CPL, simply divide your total advertising cost for a given campaign or ad group by the number of leads generated by that campaign or ad group. You can similarly calculate CPA by dividing the number of clicks on your ads that led to a new customer by the cost of running those ads. Determining your current CPL or CPA is a crucial first step in lowering your advertising costs in the long run.

See how CallRail’s multi-touch CPL calculator can help you figure out exactly how much you should be paying per lead.

Figure out how people are finding you

There are a number of strategies that are effective to reduce CPL and CPA. (For clarity’s sake, I’ll just refer to CPL from here on out.) The first thing you should do is take a closer look at the actual queries people are putting into a Google search when they’re clicking your ads. By digging into your keyword data to discover what actual queries prospective customers are using, you’ll start to identify negative keywords that will improve the efficiency of your spend and drop your CPL.

It will be easier to uncover CPL patterns in your keyword data if you’ve assigned all of your keywords to separate ad groups. This account structure will enable you to optimize for CPL at a more granular level. In particular, you’ll be able to see how the individual keywords contribute to your campaign’s overall performance. As a result, it will be easier for you to distribute your marketing budget according to how the individual keywords in those ad groups are performing.

To get started analyzing your CPL data, take a look at the Search Terms Report. This report details all of the search terms that people have used that resulted in your ad being shown. In reviewing the report, you might discover that the people who are engaging with your ads were searching for something completely unrelated to your business. Or you might find that certain keywords are converting at much higher rates than others. As you go about this process, it’s important to remember how the costs associated with your keywords affect your CPL.

If a search term you are targeting has a high cost-per-click, but a low conversion rate, then the average CPL of that keyword will be higher. Alternatively, if a search term has a low cost-per-click and a high conversion rate, then your cost-per-lead will be much lower. Of course, that latter type of keyword is the one you want to allocate more of your budget to. Sorting out your high and low performing keywords can take a while to iron out just right. So experiment with different types of keywords, taking full advantage of the data included in your search terms report to hone in on the ones that are best for your business.

The power of precision

At Logical Position, we recommend that our clients reduce CPL by using one particular type of keyword: long-tail. These keywords are simply ones that are highly specific (and therefore longer in length). “Men’s black nylon running shoes,” or “biomedical patent attorney in New York” are examples of long-tails.

Compared to broader keywords (like “men’s shoes” or “lawyers in New York”), long-tails generally result in lower CPLs. This is partly because there are fewer advertisers bidding up the keywords’ CPCs, and partly because the people searching those keywords are more sure about what they want — and therefore more likely to convert. Getting more into the mind of your customers by imagining what keywords they might search is one key way to reduce CPL, but it’s not the whole story.

After all, not everyone who clicks on an ad or calls a business from an ad ends up making a purchase. So how can we better understand what went wrong? By taking advantage of CallRail’s Keyword Call Tracking and Recording features, it’s possible to identify which of your keywords lead to successful phone calls, which don’t, and why.

For example, if you noticed that all of the people who called you after searching a particular keyword were actually looking for something your business doesn’t offer, you would want to check your ad text for relevance. If the text seemed somewhat misleading, you could adjust it with the hopes that people who view your ad in the future will have a better idea of what your business offers. As a result, you could decrease your number of unqualified leads and, ultimately, reduce CPL.

Another way to gain greater insight into your ads’ effectiveness is with CallRail’s Multichannel Attribution feature. In practice, this service makes it possible to see all the online interactions that a customer had with your business before making a call. You could know, for example, see that a customer first visited your site through a Google search ad, then through an organic search, and then again through a remarketing ad before finally calling. Being able to see the path a customer takes before converting allows you to better evaluate the number of leads each channel brings and, therefore, the CPLs associated with each.

Clearly, the process of optimizing your CPL and CPA can be tricky and, depending on the number of channels you’re utilizing, quite involved. But when you pair Google Ads with CallRail, you’ll be able to understand your customers’ decision-making behavior in ways that make the process easier. Short of reading their clients’ minds directly, a business couldn’t ask for better insight into how effective their marketing efforts are at generating high-quality leads at lower costs.

This is a guest post from Ryan Garrow, an Enterprise Strategist at Logical Position and a driving force behind its rapid growth and nationally-recognized success.

If you’d like to see how call tracking can help you reduce CPL and earn better leads, begin your 14-day free trial of CallRail or request a personalized demo.

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