Are You Considering Pay Per Click?

by Mark Fordice

Are you considering advertising your business online using Pay Per Click (PPC) advertising?  Do you feel like you might be the only company who is *not* already doing it?  Last year, 500 U.S. companies were studied regarding their use of PPC.  Surprisingly, 64% of B2B and 73% of B2C are using PPC.   That means at least a quarter or even a third of businesses are not using this well-established advertising method.

Some companies are scaling back their PPC spending while some are abandoning it altogether.  Tom Telford, with Cedar Creek Cabin Rentals, has been using PPC for over 12 years.  Mr. Telford found his average price for a click was doubling over just a few years because of increased popularity and competition.  The New York Times reported last fall that this is a common problem as more and more large companies with significant budgets crowd into this advertising space.

What’s a non-PPC company to do?  Here is Pivot’s advice for companies that are thinking about getting into Pay Per Click:

  1. Understand what a qualified lead is worth to your company.  For example, if a new customer will spend $12,000 with you, on average, and one in ten leads turns into a customer, your cost per lead cannot be $1,000 ($12,000 divided by 10), because that would leave no money for product, service, taxes or profit.  So Cost Per Lead (CPL) can’t be based on that. Instead, it’s calculated by dividing the advertising spend by the number of leads generated.  If you spent $5,000 to appear at a local tradeshow, and you generated 20 leads, your CPL would be $250 [1] each ($5,000 divided by 20).  Don’t start PPC unless you have reason to believe you can generate good leads for a price your business can afford.
  2. Determine what a lead might cost you using Per Per Click.  Use Google’s Traffic Estimator or their Keyword Tool (compared here) or ask Pivot to help.  Based on what you’re selling and the keywords that make sense for that product or service, we can estimate how many people are searching for you online today and what a click to your website might cost you.  If a click costs you $2, and every twentieth click turns into a qualified lead, you’d have a CPL that beats the example above–and maybe Pay Per Click is something you should jump onto soon.  If the expected traffic is low or the price per click is exorbitant, it might not make sense to use PPC.
  3. See what the competition is doing.  If you have clear competitors and they are using PPC, that’s a good indicator that it’s working for them.  Of course, some businesses throw away perfectly good advertising dollars, but if your competitor is into PPC then you should think twice before deciding against it.  If your competitors are nowhere to be seen, there are at least two good, possible reasons: either they are unaware of the opportunity or they have tried and discontinued.
  4. Build a game plan.  If there appears to be a legitimate opportunity to make money using PPC, it’s still not a slam dunk at this point.  Before you jump into Google Adwords or Yahoo/Bing BingAds and set up your account, some planning is in order.  As Lily Vishas writes, It’s important to develop goals and a budget, create a list of useful keywords (and their opposites, the negative keywords), develop compelling ads, and optimize as results start coming in.   You can teach yourself or you can lean on an expert.  Both paths have their advantages.

If you decide to take the plunge into Pay Per Click, you may find a completely new avenue for generating leads and ultimately more revenue.  But do keep in mind that most Pay Per Click experts report that it’s crucial to monitor your ad campaigns and manage this advertising channel actively.

 


[1] Obviously, attending a tradeshow can be for multiple purposes including brand-building, partnerships, networking and more.

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