Guides, Marketing Strategy, PPC

Marketing Guide Part 3: Pay-Per-Click Advertising (PPC)

By Dmitrii Kustov on September 13, 2019

So far in our six-part guide to a better internet marketing strategy, we’ve discussed how important it is to put a digital marketing strategy in place and talked about the vital role the organic search channel has to play in your internet marketing efforts. The next stop on our digital marketing journey is pay-per-click advertising, which is commonly known as PPC. 

In this part of our guide, we’re going to explain what PPC is, how it works and what you can do to squeeze every last cent of value from your PPC spend. 

What is PPC?

Very simply, pay-per-click is one of the methods for marketing your business on search engines. Compared to generating organic visits to a website through search engine optimization, PPC involves creating ads that appear on search engine results pages whenever someone searches for something related to particular products or services. You then pay a fee every time your ads are clicked (hence pay-per-click).

The goal of a PPC ad is to generate lots of clicks and attract new visitors to your website or app. The hope is that those visitors will then perform a valuable action such as booking an appointment, purchasing a product or getting in touch. 

How does PPC work?

Advertising space on popular search engines such as Google and Bing is sold on an auction basis using real-time data. To participate in the auction, you must create ads that target certain sets of keywords and then decide how much you’re willing to bid on those keywords to ensure your ad is shown. If your ad appears on the search engine results pages but is not clicked, you do not pay a cent. That gives your business free brand exposure. If your ad is clicked, you pay the amount you bid. 

Which businesses can benefit from PPC?

The truth is that pay-per-click is not the most cost-effective form of internet marketing for every business. For example, a small business operating in a competitive market with national brands may see a much higher cost for PPC, effectively reducing the potential profit. 

Say there’s a small running shoe company that wants to advertise with PPC. Competition for the same ad space includes companies like Nike. Nike has a much larger ad budget, which allows them to bid more, driving up the cost per click. Even if the small company is selling shoes for $100, it could cost significantly more to advertise in the same space as Nike.

Experienced PPC agencies avoid this by conducting initial research into your industry to find out exactly how profitable a PPC campaign is likely to be before the even starting any work. Rather than wasting your money, good PPC agency should explain PPC prospects upfront and recommend other digital channels that are likely to provide a better return on investment (ROI).

Calculating the Benefits: Is PPC cost-beneficial?

To determine whether or not PPC would be a benefit in terms of your ad budget, follow this simple formula:

calculate if I should invest in PPC
Use this calculation to determine if it’s worth investing in PPC for your product or service

If the equation is true for you, then it may be worthwhile to invest in PPC. However, consider that PPC alone isn’t sufficient for an entire marketing strategy. If the results are fairly close to a maximum margin, don’t overextend a budget in an attempt to incorporate a completely new marketing channel.

Here is an example:

Let’s say average CPC for your product or service is $5, average conversion rate is 3%, and Internal Lead-to-Sale Rate is 33% (out of every 10 leads, 3 become sales).

This would mean that your average cost per sale from PPC channel would be $5/(0.03 *  0.33) = $505

Is the product or service you sell has a margin of more than $505?

Cost Per Conversion: Measuring ROI for PPC

One of the key advantages pay-per-click advertising has over almost all other forms of online and offline marketing is that you only pay when you generate results. If you were to advertise on the television or the radio, you would pay a set amount for the advertising space, with no guarantee of results. 

In PPC, the advertising space is completely free. You only pay when the ad is clicked. When PPC is working correctly, the price for a click is fairly reasonable compared to what that visit is worth to your business. It’s not necessarily a miracle of digital marketing, but it’s certainly worth consideration.

There are many different metrics our experts pay attention to when creating a pay-per-click campaign, such as impression share, click-through rates (CTRs) and cost per click. However, as a business owner, the only metric that really matters to you is the cost per conversion.

Cost per conversion is how much it costs to obtain a customer who completes an action successfully. That action or conversion could be a sale, signing up to your mailing list, enquiring about your services, booking a consultation and many more – basically, a lead for your business.

Calculating the cost per conversion of your PPC campaign is easy. For example, if a PPC campaign costs $40 for 20 clicks, and of those 20 clicks, 5 of the visitors convert, your cost per conversion is $40/5 = $8 per conversion. 

How to calculate cost per conversion in internet marketing
Simple calculation for cost per conversion in marketing

It then becomes very easy to calculate your ROI.

If the goal of your advert is to make a sale and your average sale is worth $50, and $20 of that $50 is profit, your PPC ads are generating a return on investment of $20/$8 x 100 = 250 percent.

A better way to calculate ROI in marketing
Not a traditional, yet very useful way to calculate ROI

Return on Ad Spend is another important metric. When using an ecommerce store, Google AdWords will automatically calculate return on Ad Spend, which is basically like ROI for how much is spent on Ads. It’s possible to calculate this directly, but the automation built into Google AdWords makes it significantly easier to keep track of.

PPC is trackable

One of the primary benefits of PPC is that absolutely everything is trackable. You can see exactly what is and isn’t working, which makes it possible to adjust your campaign as you go to achieve the best possible return on investment. With additional plugins, such as heatmaps and session recordings, you can follow the step-by-step actions visitors make on the landing page. That information can be utilized to optimize landing pages, further increasing the chance of conversions. 

You can also set budgets per day to make sure you only spend an amount you can afford. The main benefit of this feature is that you can test how effective your PPC campaign is, which helps you optimize a campaign to 100%. Making the most out of a small budget is the goal, and PPC allows for that as long as it’s well optimized. You can then raise your budget once you know your ads will generate enough revenue to justify that initial spend.

PPC generates almost immediate results

Another significant advantage of PPC over other online and offline marketing techniques is the speed with which you can start generating results. With a search engine optimization campaign, it can take months before you start to see results for your best keywords. In a competitive market, or in industries with a great deal of similar businesses, it will generally take a significantly higher amount of time and effort to rank on page one. That usually translates to increasing the budget as well, which is why PPC can sometimes be a more cost-effective method if you’re looking for quick results.

With PPC, once you’ve created your ads, you can bid on your keywords and appear at the top of page one almost immediately. That will bring instant traffic to a product launch, seasonal promotion, limited time offer or other projects that require immediate and targeted results.  

Continuous Evolution: Your PPC Strategy Must Never be Static

To make the most of your PPC budget, it’s essential that your PPC campaigns are in a state of constant evolution. They should adapt to variables such as seasonality, user-intent, and fluctuations in demand. If your PPC strategy stays completely static, you’ll end up wasting money on less valuable clicks or potentially failing to generate clicks altogether.

As a very simple example, a pool business should focus on PPC campaigns to sell pool accessories, parts and cleaning products during the summer months when people’s pools are in use. In the winter months, the PPC budget should either be reduced or refocused on encouraging customers to sign up for a mailing list and other educational materials to ensure that pool business is the first place customers visit when summer comes around. 

The importance of A/B testing

A/B testing, also known as split-testing, has an important part to play in the success of your PPC campaign. PPC is not a set and forget type of marketing. A/B testing allows you to test what’s working and find solutions to what’s not, so you can fine-tune your campaign and optimize your spend. You can test the headline, body text, call-to-action, product description and keywords until you find the best performing combinations. 

Landing pages should also be well optimized to make the most of any PPC campaign. A/B testing is an excellent way to see which campaigns are more successful, but without well optimized landing pages people may not convert when they get to your actual website. PPC is a great tool for funneling clicks to your website, but you need your website to back up whatever your PPC campaign was selling.

Split-testing PPC ads can be done for a variety of reasons. Sometimes, you might want to test which type of ad gets people to buy right away, while for high-end products, you may find a more informative and less direct approach ultimately leads to more conversions down the road. In either case, you must make sure you have a goal in mind from the start as that will determine how you analyze your results.

Tips & Tricks: How to Make the Most Out of your PPC Campaign

With many years of experience setting up and managing PPC campaigns for businesses across the world, we’ve learned a few tips and tricks along the way to deliver results and reduce your spend.

1. Top spot isn’t everything!

Inexperienced PPC marketers might assume that being the #1 paid listing on the search engines is the place to be. However, in reality, you’ll pay considerably more per click if you’re #1 than you would in the #2 spot, and in the vast majority of cases, the #2 ad receives almost as much interaction.

2. Make sure your ads show at appropriate times

If you run a restaurant that’s open until 11pm, you shouldn’t have PPC ads that run until midnight. If you do, any clicks you receive for ‘restaurants near me’ type keywords after around 10.30pm are likely to represent wasted spend. 

3. Invest in performance over a perception

With so many metrics provided and broken down into specific sections, you can identify which areas and demographics provide the best return on your PPC spend. Location is a good example. Many businesses want to spread their PPC campaigns across as large a geographic area as possible so they are perceived as having a wide reach. However, by doing so, they often neglect their best performing locations, which reduces the effectiveness of their campaign.    

Similarly, you might insist on being the #1 ad on the search engine results pages because that’s the perception you want of your brand. But, if the #2 spot delivers similar performance for a reduced spend, you’ll simply be wasting your money. 

4. Don’t rely on auto-suggestions

AdWords has a recommendations section that can auto-apply AdWords system suggestions to a campaign “to make it better”. Unless you have a great deal of experience, we’d suggest avoiding this automatic feature altogether. For most campaigns, this results in a much worse performance because the system uses an algorithm that doesn’t account for everything. By manually adjusting your campaign, not only do you have greater control, you can make decisions that an algorithm might not account for. In our experience, we’ve almost never seen the automatic suggestions perform better than a manually adjusted campaign.

5. Be wary of automatic bidding strategies

Automatic bidding strategies run into similar issues. While automatic bids are technically easier than manual bidding, they are often less efficient. It’s almost always more expensive than manual bidding, and again, you have less control over how your campaign performs. If your goal is to maximize the efficiency and reduce excess spending in your budget, it’s best to avoid the auto bids.

Getting the Most from Your PPC Campaign

Squeezing every last cent of value from your pay-per-click campaign takes a heavily data-led approach and years of experience. However, we hope we’ve provided you with a few pointers that will help you rethink your current strategy and deliver a significant increase in sales and leads. 

Just like any digital marketing technique, PPC is most effective when it’s used in combination with other channels such as search engine optimization (SEO) and social media. But that’s not to say PPC can’t be extremely effective as a standalone strategy, too.  If you’d like to discuss a new or existing PPC campaign with our experts, please do not hesitate to get in touch with our team.

Dmitrii Kustov
Internet Marketing Director at Regex SEO

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