Is your business feeling the squeeze of the current economic climate? With costs rising across the board, profit margins are shrinking. The last thing you want to be doing is handing over a huge slice of what’s left to Google, especially when costs per click were going up long before everything else!
In this article, we’ll look at ways of reducing CAC (customer acquisition cost) for Google Ads campaigns. We’ve got some simple strategies to help you preserve your margins or even improve them to drive growth for your business.
What is Google Ads CAC?
Let’s first set out what we mean by Google Ads CAC. Your customer acquisition cost is the amount it costs you to get a new customer from your Google Ads.
Google Ads metrics like CPA (cost per action) and CPC (cost per conversion) factor in only your ad spend. Remember your CAC for Google Ads actually includes all the spend that goes into your ad campaigns, including design, copywriting, salaries, commissions, and admin.
How to calculate Google Ads CAC
Before starting to look at ways of reducing CAC for Google Ads campaigns, you first need to know your current CAC. This can be calculated by simply taking the total amount you spend on Google Ads in a particular period and dividing it by the number of new customers acquired via those ads. That gives you the average amount it costs to get a new customer from Google Ads.
Keep in mind that it’s the total amount you spend on Google Ads, not your total Google Ads spend. Factor in the things we’ve mentioned above, like the time that’s spent on creating, maintaining and reporting on Google Ads. You’ll need to put monetary values on all of those things in order to accurately calculate your CAC.
Strategies for reducing Google Ads customer acquisition costs
Let’s take a look at some of the best strategies for reducing Google Ads CAC so you can lower the cost of bringing new customers to your business.
1. Ditch low-performing ads
If your Google Ads campaigns are running profitably, it’s easy to bring some low-performing ads along for the ride inadvertently. Dig into the details of your campaigns to find out which ads are bringing in new customers most cost-effectively. Stop ads with high CAC and especially stop those that are not bringing in sales at all.
Even for ads that are working well, use split-testing to improve performance. Test colors, copy, calls-to-action, and audience targeting — see what lowers CAC for your ads, then do more of it.
2. Ditch low-performing keywords
It is a very simple point, but one worth reiterating: do your keywords actually match your ads? If not, this could be generating clicks on your ads that do not ultimately result in sales. Deadweight keywords that are not driving the right people to your website eat up your budget and inflate CAC.
Google rewards ads that already have closely matched keywords with better placements and cheaper clicks, both of which will reduce CAC. So that’s definitely the way to go.
To optimize your keywords:
- Choose keywords that are closely related to your ad intent
- Check the search terms tab in your Google Ads account every couple of weeks, adding low-performing terms to your negative keywords list and top-performing search terms to your campaign keywords list
- Monitor quality score, which is Google’s measure that your keywords match your landing page
- Use a manageable number of keywords (ideally less than 20) per ad group
- Don’t let Google Ads settings like broad match keywords undermine your good work
3. Delve into your CAC in Google Analytics
Your Google Analytics data could contain the answer to lower Google Ads CAC. Take a look at conversions from your Google Ads campaigns and consider:
- Which days are best for conversions?
- What times are best for conversions?
- Where are new customers based?
- Which devices do new customers use?
Maybe your Google Ads are most successful when targeting people in Belgium using desktop devices on Saturdays. Tailor your ad campaigns to reach the right audience at the right time to reduce CAC.
McDonald’s Hong Kong is using this approach to increase app orders. Collecting real-time ecommerce data via Google Analytics 4, McDonald’s used predictive audiences to find the customers most likely to order again within seven days. These predictive audience segments were then exported directly to Google Ads. The resulting campaign increased conversions by 550% and decreased acquisition costs by 63%.
Tip: Littledata’s Google Ads to Google Analytics connection gives you accurate reporting for better CAC calculations and improved retargeting.
4. Improve your tracking
If you’re not able to get the sort of data we’ve just discussed from your Google Analytics, you might need to improve your tracking. This will ensure you can accurately determine:
- Which Google Ads campaign has driven a particular click
- What that potential customer did when they landed on your site
- Whether it converted into a sale
5. Tackle your hidden CAC
We’ve already discussed how CAC goes beyond CPA, which is the tip of the iceberg. That figure is based on your ad spend — but what about the cost of time and resources managing your Google Ads campaigns?
Using Juni’s Google Ads integration you’ll be able to reduce administrative costs with features like Google Ads automatic receipt generation, a centralized overview of your ad accounts in real-time in a single dashboard, and monthly invoices pulled automatically from your account.
6. Create and test landing pages
It’s tempting to find an ad that converts, direct people to your homepage or a category page, and wait for the sales to come in. That’s great, but how much higher would your conversion rate be (and consequently how much lower would your customer acquisition cost be) if you created a custom landing page dedicated to the proposition of your ad? Once your landing pages are in place, you can run A/B tests to improve your conversion rate.
Map software Radar created a suite of landing pages on which the copy was tailored to the intent of the ad that the potential customer had clicked. The result was a 50% increase in conversions and therefore a huge reduction in their Google Ads CAC.
Create further savings by using:
- Sitelink extensions, which allow you to create links to multiple landing pages within a single ad
- Image extensions, which places a CTR-boosting image next to your ad
- Callout extensions, which enable you to add extra text to promote free shipping, discount, price matching and other benefits within your ad
7. Use remarketing
Remarketing — the Google Ads version of retargeting — allows you to reach people who have already visited your website via Google’s display network. Warmer leads usually result in a higher conversion rate. That higher conversion rate should translate to a lower CAC on Google Ads.
Fintech company IndiaLends used remarketing to reduce its customer acquisition costs by 53%. Just keep in mind that this approach still needs people to find their way to your website initially.
8. Use bidding strategies
One way to make your ad budget go further and reduce acquisition costs is to use bidding strategies. There are a range of options for bidding strategies within Google Ads automated bidding. These include enhanced CPC, maximise conversions, maximise clicks, and target return on ad spend (ROAS).
Any of these options may offer a route to lower CAC. For something that’s right on the money, experiment with target CPA, which essentially allows you to name the CAC you want to achieve. But remember, Google Ads is not one size fits all.
Octopus Energy cut acquisition costs by 36% when it switched bidding strategy from target CPA to target ROAS.
There are also third-party apps that will help you to implement bidding strategies. Cosmetics brand Charlotte Tilbury Beauty used Scibids and was able to cut its acquisition costs by 29%.
9. Test user-generated content
User-generated content tends to perform better and costs less per click across all platforms. Run tests to see whether this applies to your Google Ads accounts. You could choose to use user-generated content from YouTube videos, customer reviews, Google Seller Ratings, or find another way of incorporating user-generated content within your ads.
Danish ecommerce brand Cykelpartner reduced its acquisition costs by 11.14% — saving the business more than €40,000 per year on Google Ads in the process — by incorporating reviews within its ads.
10. Get cashback on your Google Ads spend
A simple way to boost ROAS and reduce CAC is to get some of your Google Ads spend paid back to you. That’s exactly what Juni offers. When you pay with your Juni card, you’ll receive 2% cashback for your first 30 days, and up to 1% cashback thereafter.
Excellent Sneakers gets more than £1,000 paid into its account every month as cashback on its ad spend. The result is that each click, conversion and customer acquisition costs less than would otherwise be the case.
Start reducing your Google Ads CAC now
As with any process for optimizing paid media, reducing CAC for Google Ads is going to involve some trial and error. Different brands, products, and audiences need different approaches.
You can get to work immediately on some of these strategies and start to build up an idea of what works for you. For some quick wins:
- Study Google Analytics for useful conversion insights and update your campaigns accordingly
- Find underperforming ads, mismatched keywords, and other Google Ads basics that are pushing up CAC
- Create and test landing pages that are closely aligned with specific ad groups, keywords, or campaigns
- Start earning cashback on your Google Ads spend
This is a guest post from Juni, the financial platform built for ecommerce that ties together physical and virtual cards, accounting, analytics and digital advertising platforms, giving businesses a holistic view of their finances.