One of the most important goals for advertisers is to reduce their expenses while keeping their ROI high.
There are a few tactics available to achieve that goal. One of those tactics comes down to understanding the relationship between Quality Score and Cost Per Click (CPC).
In this article, we are going to cover that in more detail so that you can apply it to increase your Ad Rank and in turn your overall campaign performance.
Why is the relationship between Quality score and cost per click important?
First, let’s make a quick refresher of what they are and how they work.
Quality score (QS) – is the aggregated measurement of how your keywords are performing. It summarizes the results of real-time auctions on a scale from 1 to 10, 1 being the poorest and 10 as the best score.
To come up with a Quality score number, Google ads measures the performances of its three components:
- Expected click-through rate (ECTR) – Google ads estimates the ECTR based on the historical CTR of your keywords and also it compares them with the performances of other advertisers
- Ad Relevance – evaluates how relevant the search query someone types on the SERP (search engine results page) to the keywords that you are targeting
- Landing page experience – evaluates the relevancy of your landing page content to your target keywords. It also measures the user experience (e.g. speed, ease of navigation, etc.) of your landing page
Quality score is slightly different from Ad quality, which is used to calculate Ad Rank.
But, their components are the same as given above.
Cost per click (CPC) – is the cost you pay for a click on your advertisement.
There are Actual CPC and Max. CPC. The actual CPC is the final amount you pay for an ad click, which is less than the max. CPC.
Most of the time Google ads won’t charge you more than your Max. CPC unless you are using smart bidding strategies. So, depending on other factors like Quality score and Competition, sometimes you may be charged much less than your Max. CPC.
Why are they important?
The components of Quality score and your bid price have a big impact if not the biggest on your Ad Rank.
I think if you focus on improving these two metrics of your ads, every other component of Ad Rank takes care of itself and you can ultimately increase your position on the SERP.
For example, to get higher ad positions with competitive keywords, having high quality ads (e.g. high Quality score) and high CPC would increase your chances of beating the competition without you worrying about the competitors.
Effects of Quality score on CPC
Although it may not always be a good idea to evaluate your campaign performances based on Quality scores from 1 to 10, it can give you a general overview of how your ads are performing and how 1 point change in Quality score, can affect your cost per click.
A high Quality score means that you have an improved combination of Expected click-through rate, Ad relevance, and Landing page experience.
As they are also measured in the Ad quality component of Ad Rank, their improvements provide you a high Ad Rank even if you get lower scores from other remaining components.
In this example, you can achieve the same Ad Rank as before with a lower max. CPC bid.
I have found a great example from Wordstream that can illustrate what I am talking about.
Although the calculations you see in the picture cannot be used now, they can give you a basic understanding of how a 1-point change in Quality score can affect your cost per click.
To learn more about the change of Quality score check out this article.
How can you measure the impact of Quality score to Cost per click?
As you know already, a higher Quality score can reduce your actual CPC.
But, how can you measure the impact of its 1-point change on your CPC?
You can measure that by adding the Quality score hist. column to your Statistics table and segment it by day.
That gives you an idea of how your Quality score has been performing historically and its effect on other metrics such as your Max. CPC bid.
Can a higher Quality score guarantee a lower CPC?
This question is asked by many beginner advertisers. As they think a higher QS means their CPC should always decrease. Therefore, they often complain if they see high bid prices with their 9 or 10 Quality scores.
In fact, there are at least 4 other factors involved when calculating your Ad Rank (check again all other factors from the picture above).
If your ads are performing poorly in those areas, it can reduce your Ad Rank regardless of your high Quality score and it can increase your actual CPC.
Yes, a higher Quality score can lead to a lower CPC. However, it is not set in stone.
Effects of CPC on Quality score
Increasing your max. CPC doesn’t have any effect on your Quality score. They are independent of each other.
Higher CPC can increase your CTR and ad position. But, since the effects of ad positions and ad extensions are excluded when calculating your Quality score, any change in CPC can only affect your Ad Rank.
There are some instances where your CPC can be used to tell you the performances of your campaigns.
For example, if your CPC is getting more expensive over time, then that might indicate that you need to increase your ad quality i.e. your Quality score to reduce your costs.
For advertisers who want to increase their conversion rate, reduce their costs, these two metrics have an important role to achieve them.
Understanding their relationship thoroughly would increase your chances of success and improve the quality of your Google ads campaigns.
To learn more about Quality score check out my other articles.
Do you have any other questions? If so, leave me in the comments section below…
You can reach out to me for any help in your Google ads campaign management.