Navigating the world of PPC advertising can feel daunting, especially when you’re investing your hard-earned money. However, the reality is that growth often requires financial input. Fortunately, digital platforms provide us with a wealth of data that can be leveraged to determine where to allocate resources effectively and maximize returns.

We can also leverage advertising benchmarks to set realistic and achievable goals. In the case of Google Ads, numerous metrics are available to guide our strategies, and one of the most crucial ones concerning costs is cost per lead. This article delves into the concept of cost per lead and outlines actionable steps to reduce it, ensuring that your advertising budget translates into tangible business outcomes.

Table of contents

• What is cost per lead?
• What’s a good cost per lead?
• How to lower your cost per lead in Google Ads

What is cost per lead?

Cost per lead (CPL) is a key PPC metric that reveals how much you spend to acquire a conversion from your ads. A conversion represents the desired action you want users to take after clicking your ad, such as scheduling an appointment, downloading a resource, filling out a contact form, or making a purchase. CPL is also referred to as cost per action (CPA) or cost per conversion.

To calculate CPL, divide the total cost by the number of conversions. For instance, if a campaign costs $500 and generates 50 conversions, your CPL is $10.

Based on this formula, lowering your CPA involves either boosting conversions, reducing costs, or a combination of both. However, the process is not always straightforward.

It’s important to consider that a typical Google Ads account comprises multiple campaigns and keywords, each with varying levels of value for your business. Furthermore, factors like campaign maturity, conversion rate optimization efforts, overall budget, and available resources come into play.

Therefore, reducing your CPL usually requires a strategic blend of actions implemented across different campaigns within your account. Let’s explore these strategies.

What’s a good cost per lead?

The definition of a “good” cost per lead varies significantly depending on your industry. For instance, industries like Furniture, Career/Employment, Legal, and Business Services tend to have higher average CPLs, exceeding $70, while industries such as Automotive Repair/Service/Parts and Animals/Pets typically have CPLs below $20.

For comprehensive insights, explore our online advertising benchmark data. Keep in mind that within your account, you might observe different CPLs for various keywords and campaigns because certain offers hold higher value than others.

How to lower cost per lead in Google Ads

As previously mentioned, there is no one-size-fits-all formula for reducing your cost per lead. While it boils down to increasing conversions and/or decreasing costs, there are multiple approaches to achieving these objectives. Let’s delve into these strategies.

1. Review your “limited by budget” campaigns

One effective method to lower costs is by reducing your bids. Start by identifying campaigns that are “limited by budget.” “Limited by budget” is a status indicating that your bids are competitive enough to participate in a certain number of auctions, but your budget restricts the number of times your ad can appear.

For such campaigns, consider the following options:

• Increase budget. If the campaign holds significant value and your budget allows, consider increasing it. This might lead to more conversions, but bear in mind that if spending outpaces conversion growth, your CPL won’t improve.
• Lower your bids. This will place your ads in less expensive auctions, potentially leading to more affordable clicks at lower ad positions. However, keep a close eye on your conversion volume. If lowering bids reduces your CPA by 30% but also lowers your average position and decreases conversions by 50%, it’s not a worthwhile trade-off.
• Use the “Search lost IS (budget)” column (indicating impression share lost due to budget) and “Estimated first page bid” column to assess the extent to which your campaign is limited by budget and identify the minimum bid required for optimal visibility.

If a high-CPL campaign is not budget-constrained but holds high value, consider reducing bids or budgets for lower-value campaigns to improve your overall account CPL.

2. Enhance your Quality Score

Lowering your bid can effectively reduce cost per click, ultimately lowering your overall CPL. However, winning Google Ads auctions with lower bids requires a high Quality Score. Google’s auction system rewards high-quality ads by assigning them lower costs per click.

To boost your Quality Score, focus on its three main components:

• Expected click-through rate: Implement strategies to enhance your CTR, such as leveraging ad extensions, ad customizers, and optimizing ad copy.
• Landing page experience: Ensure your landing pages are trustworthy, relevant, and user-friendly. Prioritize landing page optimization to reduce your CPC.
• Ad relevance: Maintain strong alignment between your keywords, ads, and landing pages. We’ll elaborate on this in the next section.

3. Refine your account structure

Your account structure, which refers to how you categorize keywords and ads into ad groups and subsequently organize these groups into campaigns, plays a vital role in reducing CPA. A well-structured account offers several benefits:

• Improved relevance and Quality Score: Single-themed ad groups ensure strong alignment between keywords, ads, and landing pages, enhancing relevance and boosting Quality Score.
• Effective automated bidding: Automated bidding strategies operate at the campaign level. A well-organized account provides Google with sufficient and consistent data for bid optimization and cost control.
• Efficient budget allocation: With campaigns logically organized (e.g., based on value), budget allocation becomes more manageable.
• Performance pattern detection: Themed ad groups make it easier to identify CPL trends and allocate budget based on keyword performance.

4. Fine-tune your bids…

Thoroughly examine your campaigns and eliminate any wasted spending on campaign settings or targeting. If you’re using Manual or Enhanced CPC bidding, consider adjusting bids based on:

• Device: Optimize bids for different devices like desktops, mobile phones, and tablets.
• Demographic: Tailor bids based on age, gender, location, and other demographics.
• Audience: Segment and adjust bids for specific audiences based on detailed demographics, in-market segments, affinity groups, and custom segments.
• Networks: Adjust bids for different networks, including Search, Display, and Partner networks.
• Time of day: Optimize bids based on your ad schedule.

If specific time slots, networks, locations, or devices exhibit lower conversion rates, consider excluding them or adjusting bids accordingly.

5. …or your targets

When using automated bidding strategies, your ability to modify bids is more restricted. However, you can adjust your targets. For instance, with the Max Conversions bidding strategy, you can set a target CPA (tCPA).

Setting a target CPA is an effective way to control costs if you know the break-even point for your conversions. However, ensure your target is realistic. Setting an overly ambitious target might make it difficult for Google to find suitable auctions, potentially reducing impressions, clicks, and ultimately conversions, leading to a higher CPL.

6. Optimize your keywords

A well-structured account facilitates the identification of keyword performance patterns. Look for the following patterns and take appropriate actions to lower your CPL:

• Nurture high-performing keywords: Identify keywords with low costs per click and high conversion rates, and allocate more budget to those campaigns.
• Maintain a negative keyword list: Use the search terms report to identify keywords with:
  • High clicks but low or no conversions.
  • At least 3 conversions but a CPA significantly exceeding your target (3-4 times higher).
  • Decent impressions but low click-through rates.
• Pause keywords: Consider pausing keywords with CPAs twice as high as your account average. Pausing preserves historical data while preventing further spending.
• Ensure sufficient keyword volume: While improving Quality Score is beneficial, it won’t significantly impact CPL if your high-QS keywords have very low search volume.

7. Enhance your landing pages

If you’re targeting the right audience with highly relevant ads and landing pages but still struggle with conversions, it might be time for landing page optimization. Even if your landing pages meet Quality Score requirements (relevance, usefulness, fast loading speed), there’s always room for improvement. Consider testing and optimizing various elements, including:

• Forms: Experiment with the number of form fields, placeholder text, and form button CTAs.
• Buttons: Test different colors, language, and the number of buttons.
• Copy: Optimize emotional framing, text size and colors, testimonials, and dynamic content.
• Images: Use images strategically, such as faces with testimonials, platform screenshots, and images that evoke positive or negative emotions.
• Additional features: Consider incorporating dynamic content, live chat, and video.

For guidance on landing page optimization, refer to our comprehensive landing page guide, landing page tips and tricks, and inspiring landing page examples.

8. Ensure accurate conversion tracking

Lastly, ensure your conversion tracking is set up correctly and functioning seamlessly:

• Proper setup: Follow our conversion tracking guide to ensure everything is configured properly.
• Address discrepancies: If you’re experiencing data discrepancies, troubleshoot common conversion tracking issues.
• Implement offline conversion tracking: Syncing your CRM with Google Ads provides a more comprehensive understanding of which keywords and targeting criteria drive the most cost-effective conversions. This also enables more granular segmentation and targeting. Explore Google’s help page on offline conversion tracking for available options.
• Set conversion values consistently: Always set conversion values, regardless of whether you’re using a value-based bidding strategy. This allows Google to collect valuable data and provides a clearer picture of your overall account performance. Learn how to set conversion values, even for non-ecommerce businesses.

Consider using our free Google Ads Grader to identify any other costly mistakes in your account.

Leverage these strategies to optimize your cost per lead

Lowering your cost per lead in Google Ads is not a one-off task but an ongoing process that involves adjustments across your account. Prioritize strategies based on campaign value, growth potential, and areas for improvement.

Here’s a recap of the eight ways to reduce your cost per lead (or cost per action) in Google Ads:

1. Analyze your “limited by budget” campaigns.
2. Improve your Quality Score.
3. Optimize your account structure.
4. Adjust your bids for manual/enhanced CPC campaigns.
5. Adjust your targets for automatic bidding campaigns.
6. Nurture, pause, or negate keywords according to their performance.
7. Optimize for conversions.
8. Ensure your online and offline conversion tracking is accurate and comprehensive. >> Need assistance with Google Ads? Explore our digital marketing solutions.