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Sep

30

2013

Understanding PPC for B2B: The Basics

Inbound Marketing

*Disclaimer: there are levels of nuance, exceptions, and layers of complexity that aren’t covered in this blog. PPC is as much an art as a science--we’re just skimming the surface, folks.

Ever searched for purified water USP, healthcare sanction screening, or dispensary manager program? Yeah, me either, but somebody out there has. So what is it that these search terms have in common? Well, for starters, they’re super weird things to search for on a Saturday night. And second, they’re all B2B products with highly specialized purposes that can be marketed effectively using pay-per-click advertising.

I’m not the world’s biggest pay-per-click advertising fan, but it’s an often underutilized marketing tool in the B2B world. The reason is simple: long buying cycles and complicated sales processes can make it difficult to measure the efficacy of B2B PPC campaigns. Because of this, many B2B marketers choose to spend their marketing dollars elsewhere. But with good research, proper focus, and clearly defined goals it’s possible to use PPC as a cost effective lead generation tool. You just have to understand some basic fundamentals.

Market Characteristics

Extreme market segmentation

B2B pay-per-click advertising is a complicated animal. You’re dealing with smaller audiences, and as a result lower keyword search volumes.

Google AdWords Keyword Search Volume

As you can see, per-day searches for “cars” far exceed searches for “purified water usp.” The numbers show that the latter term is targeting a highly specialized subset within a subset of the population.

Due to lower search volume and competition, your keyword bids may be significantly lower, but the low search volume also means leads can be much more difficult to capture.

Multiple Personae within each marketing stratum

Mojo Media Labs Customer Ecosystem Map
At any given point within the buying cycle you may be speaking to one of several people: the end user, the owner/operator, head of marketing, CFO, etc.. Your PPC campaigns have to be planned and implemented taking this into account.

Long Buying Cycles

B2B companies have looooooong buying cycles. We’re talking months, rather than days or weeks. Why? You may be dealing with bureaucratic corporate hierarchies, research/comparison shopping, and quarterly budgetary constraints. Be patient and take the long view. If you’re looking for an immediate return on your marketing investment, PPC ain’t it. Look at it as an investment on the future.

The Terms

Before diving head first into running your own PPC campaigns, it’s important to get a handle on the basic nomenclature you’ll be dealing with. There are a lot of PPC terms floating around the interwebs, which are often used interchangeably with other terms. It can be a confusing mess. Since we’re dealing with B2B (more steps to complete a sale, etc.), there are terms you may not see in other PPC blogs, and terms that you are familiar with that are contextualized a bit differently. We’ll stick with the basics here, and we might touch on some others when we get into formulas.

Leads, Opportunities, Conversions--Oh, My. . .

Conversions -- Actions taken by prospects in order to move to the next buying cycle stage.

Leads -- Individuals who’ve expressed an interest in your product or service by performing a predefined action: filling out a form, initiating a live-chat, calling in, etc..

Opportunities -- A qualified lead. Someone who has expressed an interest in your product or service, and who, after initial contact, meets all the necessary criteria to move on to the next phase of the buying cycle.

Deals -- The final sale.

 

Steps and Numbers: The Measurables

Impressions -- The number of times an ad is displayed, whether or not it is clicked. Or, the potential viewing audience for a particular ad based on search volume, time, location, etc..

Click-Through Rate -- The number of clicks a particular ad receives divided by impressions, expressed as a percentage.

Click-to-Lead Rate -- Number/percentage of searchers that perform a predefined action (beyond the initial ad click) expressing an interest in learning more about your product or service.

Lead-to-Opportunity Rate -- Number/percentage of leads that become qualified, or ready to buy, based on your sales criteria/business objectives.

Conversion Rate -- The number of leads an ad generates divided by the number of clicks, expressed as a percentage.

 

Now that we have a grasp of the basic terms we’ll be using, let’s take a look at some of the formulas you’ll use to measure the success of your current campaigns and make testable predictions about future campaigns.

The Formulas

When running PPC campaigns you’ll often find yourself in the position of having to make calculations based on incomplete information. For example, you may want to know how many times an ad needs to be viewed (impressions) in order to receive a specific number of clicks. To do that, you’ll need to understand how to apply a set of simple formulas. Keep in mind, this is a basic formula list and isn’t meant to be comprehensive. It’s only meant to help you understand the levels of complexity associated with your PPC campaigns. That said, let’s get basic:

*you can use variations of these formulas to find other values.

Calculate Impressions
Impressions
=
(Clicks / CTR)
*
100
Calculate Click-Through Rate
CTR
=
(Clicks / Impressions)
*
100
Calculate Clicks
Clicks
=
(Impressions * CTR)
/
100
Calculate Conversion Rate
Conversion Rate
=
(Leads / Clicks)
*
100
Calculate Conversions
Conversions
=
(Conversion Rate * Clicks)
/
100
Calculate Lead to Opportunity Rate
LTOR
=
(Opportunities / Leads)
*
100
Calculate Opportunities
Opportunities
=
(LTOR * Leads)
/
100
Calculate Opportunity to Deals Rate
OTDR
=
(Deal / Opportunities)
*
100
Calculate Deals
Deals
=
(OTDR * Opportunities)
/
100
Calculate Cost Per Click
CPC
=
Total Ad Spend
/
Clicks
Calculate Cost Per Lead
CPL
=
CPC
/
Conversion Rate
Calculate Value Per Lead
VPL
=
(Total Revenue / Leads)
*
% Profit

 

You can see how the layers of complexity continue to build the deeper you go into the marketing and sales funnels. To get an accurate estimate of what it really costs to close a single sale, you’ll also have to take into account the time spent nurturing each lead (even the ones that didn’t result in a sale), the hourly rates of your sales and marketing teams, travel costs (if face-to-face meetings are a factor in your sales and marketing process), and more. Your PPC advertising campaigns need to be extremely well thought out to ensure their profitability. One miscalculation or oversight and your business could suffer.

Understanding Value Per Lead

The single most important metric in B2B pay-per-click advertising is your value per lead. It is the metric which forms the basis for your marketing decisions, and you should not proceed with any pay-per-click activities until you understand it well. When running PPC campaigns for my clients, I always start by estimating the average value per lead. The VPL tells me how much I can afford to spend on each lead while maintaining a profit.

So, let’s say that during the discovery process I find that the client has a total monthly revenue goal of $4,000.00, selling goods valued at $2,000.00 per unit with a margin of 50%. The client currently averages 50 leads per month with a 10% click-to-lead rate, resulting in one sale per month. They would like to increase that one sale to two in order to reach their monthly goals.

The average value per lead here would be $20.00, which means I don’t want to spend more than $.75 per click, or $7.50 per lead--a total ad spend of $750.00. The current PPC advertising budget is $250.00 per month, putting the average cost per click at $.50 and the cost per lead at $5.00. I know that in order to get 50 leads per month, I need 500 clicks. To raise my leads to 100 per month, I now need 1,000 clicks. This means the client will have to raise their monthly PPC budget to $500.00 per month to gain an additional customer. This is still an average CPC of $.50--well within the acceptable range.

Now I know my minimum budget necessary to meet the client’s campaign goals, and the threshold beyond which the campaign becomes a financial risk. I’m ready to do my keyword research, competitor analysis, and begin constructing my ad groups.

As you can see, knowing your average value per lead allows you to establish realistic PPC goals by giving you a clearly defined space in which to operate.

Tips

Pre-qualify Clicks

It seems like obvious advice, but you’d be surprised how many PPC campaigns don’t take this into consideration. So, how do you pre-qualify clicks? Simple. Research. Detailed, deep research. Applying only your current understanding of the product or service you offer without further research is a sure way to fail at PPC. Even if you think you already know your market better than anyone else, Google and Bing don’t. They will try to match your product or service to as many keyword combinations as possible.

As an example, let’s say you’ve got a client in the pencil business who specializes in mechanical pencils. Through your research you find that there are two types of mechanical pencil, ratchet-based and screw-based. Your client only sells the ratchet-based variety, but when you examine their current PPC data, you notice that they are getting a disproportionately large number of clicks for screw-based pencils. So, it would seem that a mechanical pencil is not a mechanical pencil. Not only should the client be adding negative keywords to their list for search terms which include “wooden”, but “screw” and “screw-based” as well. Next you would want to emphasize “ratchet-based mechanical pencil” in your ad copy.

Monitor your search query report regularly, and add additional negative keywords to the list as necessary.

keywords

We all understand the importance of intensive keyword research, and B2B is no different from B2C in that regard. However, two important things to remember when performing keyword research for B2B campaigns: acronyms. For example, “OIG” receives roughly four times the search volume as “Office of Inspector General.”

Google AdWords Keyword Acronyms

You’ll also want to take note of any model numbers associated with your products, as they may have similar search volume (or higher) as the product name. For example, “130G” and “John Deere Excavator” both have relatively low search volume. This tells me that if I use these terms, I may want to include them as a keyword combination in my bids.

Google AdWords Model Number Search Volume

ad groups

Separate your ad groups by keywords associated with the buying cycle phase:

Example:

Prospect: “Vendor,” “Product Specialist,” “Agency,” etc.

Lead: “Learn More,” “Contact Us,” etc.

Opportunity: “Consultation,” Location-based information, etc.

measurement

Track everything. Always. Get familiar with your site’s traffic patterns and fluctuations. An intimate knowledge of your buying cycle and how it influences your site traffic is the only way to truly understand the impact of your PPC advertising efforts.

Use as many data sources as possible:

Google Analytics

HubSpot

Unbounce

Bing Webmaster Tools, etc.

Ask for Help

Ranking through organic search should be your business’s number one goal. PPC should be used in support of your organic search efforts--it is not a quick fix for crappy marketing. Due to longer buying cycles and complicated decision making processes associated with B2B, using PPC as a short term solution to increase leads will yield poor results. It may even lose you money.

So, when in doubt, consult a professional. PPC advertising should not be entered into lightly. If you don’t have the time or the budget to devote to the constant monitoring and attention it requires, outsource.

Bryan Scott

Bryan Scott is a digital marketing engineer and is the Senior Inbound Marketing Specialist at Mojo Media Labs, specializing in SEO and content marketing strategy for businesses both large and small. Bryan has used his talents to develop and implement email marketing strategies, curate and create content, inspire social media interaction, and manage multi-million dollar inbound/outbound marketing channels for companies like RackSpace, Apple, Inc., and PoolSupplyWorld.com.

 

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