A recent report released by LocaliQ outlines that the cost per lead has increased for 91% of industries that advertise on Google. The data was extracted from over 79,000 client campaigns that were running search ads from October of 2021 till September of 2022.
Many industries were hit severely by the increase in cost per lead but certain industries bore the brunt of the increase, such as Arts & Entertainment (which increased by 134%), Travel (increase of 69%), and Furniture (increase of 54%). Whilst certain industries experienced a sharp increase in cost per lead, there were however industries that saw a decrease in their cost per lead. These are Finance & Insurance (decreased by 2%), and Education and Instruction (decreased by 29%).
Cost per lead (CPL) has increased significantly. 21 of 23 (91%) industries saw an increase in cost per lead year over year, with an average overall increase of 19%. This is significantly higher than last year’s increase of 5%, in contrast to 2020’s decrease of 4%, but actually similar to 2019’s increase of 21%.
Why is this happening?
LocaliQ theorise that the reason for the increases is broad match keywords and the discontinuation of broad match modified keywords, potential inflation and increased competition. The industries that are mentioned in the list above were affected, as during and post-pandemic, individuals were looking for activities to do and are travelling more often.
The report further demonstrates that due to broad match keywords pulling in more generic, top-funnel searches and clicks, there was a decrease in overall conversion rate (C/R). The 91% of industries that saw an increase in their cost per lead saw a 14% overall decrease in their conversion rate. The last time there was a conversion rate decrease similar to this figure was in 2019, where there was a 12% decrease in conversion rate.
In terms of the cost per click (CPC) metrics – it had a slight increase with just over half of the industries (57%) affected. When looking at the 2020 and 2021 years, there were also slight decreases in the cost per click: 2021 (-4%) and 2021 (-1%), yet in 2019 – there was a 6% increase in overall cost per click.
Click-through-rate (CTR) has remained stable though. While 78% of the industries saw an increase in click-through-rate year over year, there was no overall average change. This is the first time since 2019 that click-through-rate has not increased.
What can you do about it?
To help businesses respond to these shifts and adapt to the current landscapes, LocaliQ suggested the following best practices:
- Inflation is impacting conversion rates: Inflation is a top concern among small business owners, it is most likely temporary and there are ways to adapt. Businesses should be examining their current costs and profit margins and finding ways to cut costs and make use of free and low-cost methods of marketing. Additionally, a full-funnel approach can also help with improving conversion rates. Rather than striving for bottom-funnel conversions, create campaigns for lower-friction offers to drive awareness and engagement up-funnel.
- Broad match targeting: Google removed modified broad match keywords last year, but since then it has also been pushing for accounts to use broad match with Smart Bidding. Broader matching is leading ads to appear for more queries—including those with low commercial intent. Since CTR hasn’t changed overall, people are still clicking on ads just as much, but since the intent isn’t there, they’re not converting. Therefore be proactive with negative keywords to combat broad targeting and reduce wasted spend.
- Search ads becoming more competitive each year: In PPCsurvey’s 2022 State of PPC report, 98% of participants reported using Google Ads, versus 76% for Facebook and 64% for Instagram. The more advertisers in any given channel, the higher the competition, which leads to higher bids for fewer clicks per advertiser. Therefore, it might be wise to increase your paid search budget to keep up with ever-increasing competition in the space, not just in the new year but during the 2022 holiday season. If an increase in budget is not feasible, try to improve ad relevance and quality score, optimising keywords, examining competition and more.
Why do we care?
Knowing where your campaign costs are in relation to industry benchmarks is essential, as it can help you to understand where you currently stand. If your brand is one of the most affected from an industry perspective, it’s likely because of the pandemic, inflation or recent changes in keywords and ad automation.
The best way to keep costs under control is to follow best practices and continue to monitor and test the market to ensure you get your return on investment (ROI) when using Google Ads. CleverClicks has predominantly enjoyed decreased CPL’s for our clients compared to industry standards over this period. We have years of experience in Google Ads and know how best to keep conversions high and costs low, driving a positive ROI for our clients.Tags: 1thing, digital marketing, Google ads, PPC
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