PPC vs. CPM vs. CPC: Which paid advertising model is best for you?

Paid advertising is one of the most effective ways to drive traffic, boost sales and expand your business. But entering the world of ad pricing models can feel like stepping into a maze.

Terms like PPC, CPM and CPC are used widely, but what do they mean? More importantly, how do you choose the method that best suits your objectives and budget?

This blog breaks down the essentials of PPC, CPM and CPC so you can make well-informed choices and get the most out of your advertising investment.

Ad pricing models: What are they?

Platforms like Google, Facebook and Instagram charge you to run ads. The amount you pay is ultimately determined by the ad pricing models they have in place.

Choosing the right one can be the difference between an ad campaign that has genuine results and one that spends your money while accomplishing very little.

Let's break it down:

• PPC (pay-per-click): You only have to pay when a user clicks your ad.

• CPM (cost-per-mille): You pay for every 1,000 times your ad is shown (known as impressions), whether someone clicks it or not.

• CPC (cost-per-click): You set a fixed price for each click, which gives you more control over costs.

Each model has a distinct function and supports different business goals. Knowing how these work is the key to using them effectively.

PPC vs. CPM vs. CPC: How do they compare?

1. Pay-per-click (PPC)

PPC is the preferred model for any business that wants to generate measurable engagement.

You're only billed when a user clicks your ad, meaning your budget is linked to actual interest.

• Best for: Driving website traffic, generating leads and converting clicks into sales.

• Practical example: Say you own a flower shop in Manchester and want to promote same-day delivery.

  With PPC, you create ads targeting keywords such as "same-day flower delivery Manchester". You pay only when someone clicks your ad, which makes it perfect for turning interest into action.

• Tip: Combine PPC with highly targeted keywords. Tools like Google's Keyword Planner let you identify terms with high intent but competition you can manage.

2. Cost-per-mille (CPM)

CPM is all about impressions – your ad is charged based on the number of people who see it, not how many interact with it. This makes it a great choice for increasing visibility and awareness.

• Best for: Brand awareness campaigns, particularly for new products or services.

• Practical example: Suppose you've recently opened a new event space in London. An eye-catching ad highlighting your venue's features can appear across relevant websites and social media platforms. CPM makes sure your ad reaches as many eyeballs as possible.

• Tip: Use CPM for visually appealing ads that have impact. Focus on high-quality graphics and clear messaging to make your investment count.

3. Cost-per-click (CPC)

CPC is similar to PPC but offers more precise control over costs. You set the maximum amount you're willing to pay per click, so your bidding strategy remains effective.

• Best for: Businesses that want closer budget control while prioritising engagement.

• Practical example: An online boutique selling eco-friendly skincare products might use CPC to bid for terms like "sustainable skincare UK". Starting with a lower CPC means you can test things out without risking your whole budget.

• Tip: Begin with conservative bids to gauge whether your campaign is working. Gradually increase your CPC for high-performing keywords to get the best possible results.

How to pick the best approach for ad bidding

The key to choosing between PPC, CPM and CPC lies in considering your specific goals and circumstances.

Here's a step-by-step guide to help you.

Step 1: Be clear on what you want to achieve

• Want clicks and conversions? Your best options are PPC and CPC.

• Looking to build awareness? Choose CPM.

• Want both? Think about combining strategies.

Step 2: Assess your budget

If you have only a limited budget to play with, PPC and CPC are better for keeping spending in check.

CPM does demand bigger initial outlay, but can have notable influence on brand recognition.

Step 3: Understand your audience

Using PPC and CPC ensures you don't waste money on viewers who aren't interested if you're targeting a niche market.

For a broader audience, CPM can generate broader awareness at a lower cost per impression.

Useful advice for tight budgets

Small businesses frequently worry about squandering their limited budgets on ineffective ads.

Here's how to make every pound go further.

1. Set attainable, well-defined goals

Instead of nebulous objectives like "more traffic," aim for specific outcomes. For example, "Increase website visits by 30% this month" or "Get 10 new leads per week".

2. Test before you commit

To determine which model best supports your targets, run small campaigns with each model. Testing lets you hone your strategy without taking on a lot of financial risk.

3. Use free tools to plan and optimise

• Google Keyword Planner: Helps estimate costs and conduct keyword research.

• Facebook Ads Manager: Offers insights into ad performance and audience targeting.

4. Give priority to channels with high return on investment (ROI)

Social media ads can be highly effective for engagement and offer lower CPM rates. Similarly, search ads using CPC can drive direct conversions if your aim is to make more sales.

Common pain points and solutions

Pain point 1: "I don't have time to learn ad platforms."

Solution: Start with platforms that are easy to use, such as Facebook Ads or Google Ads. These tools make creating and tracking ads really straightforward.

Pain point 2: "I have a small budget and I'm scared to waste it."

Solution: Set strict spending caps, either in terms of what you pay each day or a budget for the length of the campaign. Regularly check performance and pause or adjust ads that aren't doing well.

Pain point 3: "I'm not seeing immediate results."

Solution: Put more emphasis on long-term growth. CPM campaigns can build awareness, while PPC/CPC campaigns can capitalise on that visibility to drive conversions later.

Key takeaways

Choosing between PPC, CPM and CPC boils down to your business goals:

• Use PPC and CPC when immediate results and measurable engagement matter most.

• Use CPM for building brand awareness or launching a new product or service.

• Combine models strategically for the best of both worlds – start with CPM for visibility, then pivot to PPC for conversions.

It's all about starting small, learning from your campaigns and continuously refining your approach.

Whether you're running a boutique café or an online shop for handmade goods, the right ad strategy can help you grow without breaking the bank.

Relevant resources

• What is paid advertising? A brief guide

• How to set up a paid advertising campaign

• Audience segmentation in paid advertising: How it works

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