Consumer FinanceIntent Marketing

Implications of Customer Lifetime Value on CPC

By Nadav Shemer
Tuesday, April 16, 2019

Drivers like to complain about the cost of car insurance, but let’s spare a thought for the insurers as well. On average, auto insurance companies pay more than $50 each time a person clicks on one of their Google ads—and that’s without any guarantee of a sale.

Drivers purchase car insurance since it’s a legal requirement, but also because they know it is cheaper than their potential liabilities. Insurance providers pay cost-per-click of $50+ because they know the CPC pales in comparison to the potential customer lifetime value. Smart insurance providers create the right environment to convert clicks into paying customers.

Insurers Pay Higher  CPC  Than Any Other Industry

Searches for consumer finance products are overwhelmingly the most expensive on Google AdWords in terms of CPC, according to digital advertising consultancy WordStream. WordStream surveyed the 10,000 most expensive English-language keywords over a 90-day period. It then organized all the keywords into categories, and ranked them by the most expensive CPC found in each industry.

Wordstream found that Keywords related to the insurance industry, such as “auto insurance price quotes” and “CA automobile insurance” cost up to $54.91 per click. Mortgages and loans also ranked in the top 6 of all the industries surveyed with top CPCs of $47.12 and $44.28 respectively.

The gas/electricity category ranked a close second behind insurance with top CPC of $54.62, while the attorney and claim categories ranked fourth and fifth with top CPC of $47.07 and $45.51 respectively. Categories that also made the top 20 but ranked lower than consumer finance included: conference ($42.05), software ($35.29) cord blood ($27.80).

Download Natural Intelligence’s “Intent Marketing Trends in Consumer Finance 2019” eBook to learn more about cost per click and meeting user intent in insurance and loans.

Higher CPC Correlates with Better Leads – And Higher CLTV

As a general rule, higher cost-per-click correlates with customers that offer better odds of converting. A 1%-2% conversion rate is generally considered a good benchmark on AdWords.
The conversion rate for keywords related to insurance was 24%, according to the WordStream report. Loans converted at 12.8% and mortgages at 9%, while no other category in the top 20 converted at better than 3.6%.

Interestingly, credit, the only other consumer finance-related category in WordStream’s top 20, ranked 13th for CPC, at $36.06, but fifth for conversion rates, at 3.2%.

Another way of thinking about return on investment is customer lifetime value, or CLTV, the net profit a company earns from a customer over the duration of their relationship. American car insurance providers benefit from higher CLTV than most other industries, and not only because the average annual premium stands at $1,427 (as of 2017). As it turns out, American drivers tend to stay loyal to a single insurer for many years.

According to a 2017 survey conducted by Princeton Survey Research Associates International on behalf of, more than half of American drivers have stuck with the same auto insurance provider for at least 8 years, and about 6% have stuck with the same company for more than 30 years.

The survey also found that 39% of policy holders have never shopped around for a better rate on auto insurance. Respondents aged 37 to 52 were found to be the least likely to shop for a new car insurance provider, with 44% admitting they have never checked to see if a different company might beat the rate on their existing policy. Younger drivers are more likely to research alternatives at better terms: Respondents aged 18 to 26 were most likely to shop for car insurance on a regular basis, with 42% saying they shop around for car insurance at least once a year.

In-depth data on CLTV in car insurance is hard to come by, but even basic math shows us that lifetime value is high. If we accept that most drivers stay with their insurer for at least 8 years, and the average insurance policy costs $1,427 per year, that’s a CLTV of at least $11,416, minus overheads and claims. If we accept a conversion rate of 24% for insurance-related clicks on Google AdWords, and a top CPC of $54.91, that’s a cost-per-acquisition of $228.79.

True, this formula ignores many variables, such as multiple vehicles on one car insurance policy, inflation or deflation of premiums, and the fact that average CPCs are far lower than the top CPCs found by WordStream. Nonetheless, the numbers indicate that CLTV far outstrips CPC in car insurance and mortgages.

Best CPC Strategies Target User Intent

High cost per click shouldn’t scare you in itself, but that doesn’t mean you shouldn’t be selective in choosing the right keywords. Whether your company’s strategy is organic search or paid search, it pays to identify high-intent keywords that offer better odds of converting.

Natural Intelligence has consistently found that non-branded queries containing the words “best” or “compare” offer higher conversion rates than queries that target specific brands. Non-branded keywords indicate the user is ready to make a purchase decision. Comparison-related keywords also cost more per click than brand-specific keywords.

In its recent eBook, Intent Marketing Trends in Consumer Finance 2019, Natural Intelligence reported that gaps also existed between CPC on desktop and CPC on mobile. In Q4 2018, mortgage providers paid an average of $6.40 CPC for desktop and $3.50 CPC for mobile on Google AdWords. Similar gaps exist in car insurance for both Google AdWords and Facebook ads. In January 2019, CPC for car insurance ads on Facebook was $2.33 for desktop users and $1.48 for mobile users.

The Final Piece in the Puzzle: Inspiring Users to Convert

Attracting consumers to your website at the moment of intent is half the job. The second half is inspiring them to take action and become a paying customer.

As the Natural Intelligence research shows, there are subtle differences to how consumer finance companies can inspire users. In car insurance, Natural Intelligence has found that content that employs infographics to explain concepts enjoys higher clickthrough rates than text-only content. In mortgages, users appear to engage with interactive material, such as quizzes. In personal loans, users respond well to how-to guides.

Across all areas of consumer finance, companies that display rates and fees in a transparent manner appear to perform better than companies that don’t.

To conclude, here’s a tip for marketers of lending and insurance products: the lower CPC on mobile provides a great opportunity for companies with mobile-optimized websites: think click-to-call buttons or giving customers the opportunity to file claims on mobile—making the most of the mobile experience could boost conversions.

Judging by the numbers we looked at for consumer finance, these conversions could result in loyal customers whose lifetime value far exceeds the cost of their initial click.

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