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Date published August 14, 2014

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As engagement and the number of eyeballs on mobile continues to explode, screen real estate will be more important than ever. That means that being on the top of the results can pay off big. In search or performance display, you can always bid more. But bidding more and being able to afford what you’re paying are two different things. So one of the main challenges for marketers running pay-per-click (PPC) accounts is not just how to get on top, but how to stay there.

Conversion rate optimization is a great place to focus, because your conversion rate drives a fundamental digital marketing formula – your break-even cost-per-click (CPC). And in a fun session of “Mastering the PPC Challenge” from ClickZ Live San Francisco, that’s just what we broke down.

• How the break-even CPC formula can drive optimization strategy
• Where to find improvements in your conversion rate for search marketers

Break-Even CPC Is Your Starting Point

Increasing your conversion rate pays off. And it has direct impact on your PPC strategy. Let’s say you increase your conversion rate from 3 percent to 4 percent. In simple terms, that means for every 100 clicks, you now get four customers instead of three. Spend the same amount of budget, get one more customer. Well done.

That means, you’re making more money. Making more money means you can: pocket the extra cash (more profit), or now, you can increase the amount you pay (bid) for keywords.

There is a simple equation all marketers should know that can help you determine the max you can pay per click and still break even. And a big part of that break-even formula depends on conversion rate.

Higher Position = More Clicks, and Typically Higher CPCs

In PPC, when you increase your bid, your ad can show up higher the search results. When your ads show up higher, the amount of clicks you receive increases (so does your CPC). You’ll get more clicks (and therefore more conversions), but your clicks cost more, potentially eating into your newly minted profit.

Let’s take a look at real data from the Bing Ads Intelligence tool to provide a concrete example for text ads on search. Turns out the bulk of clicks for the exact match keyword [umbrella] occur in the top spots in positions one through four. If you’re not in the top spots, you’re missing on the majority of the clicks.

The difference in clicks from the top positions (usually one through four) and the ads on the side is why optimizing your conversion rate is so important – it drives bid. To be able to be in the top spots, you have to be able to afford it!

Strategies for Improving Your Conversion Rate

Now the question becomes, how do you improve your conversion rate?

In search, you can do the usual tactics: add negative keywords, limit your advertising when specific times of the day or geographies don’t work well. Do those first.

One of the more powerful tactics is to drive improvements on your landing page. With user-friendly, affordable tools like Unbounce, Optimizely, Visual Website Optimizer, and more, landing page testing is easier than ever.

There are so many components to test, but the important part is to start. A great starting point is your call to action, often as simple as optimizing a button.

The point is to find improvements in your conversion rate, which increases your break-even CPC. When your break-even CPC is higher, that means you make more profit or you take share. Either option is great.

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