Does PPC Work For B2B?
Yes, most B2B companies can get positive ROI from pay per click advertising.
It’s a fair question: does PPC work for B2B companies? In my experience, most business-to-business (B2B) companies are able to deploy pay-per-click (PPC) advertising tactics successfully and demonstrate a positive return on investment. The program might not fuel short term growth at the beginning, but it can almost certainly make contributions to lead generation and brand building programs over the long haul. Here are five factors to consider when developing a B2B paid media strategy.
TARGETING. It probably goes without saying, but if a company doesn’t have at least a modest sales and marketing plan in place, PPC probably isn’t going to work. PPC managers need to know where to focus resources and investments. The new business acquisition plan doesn’t need to be extraordinarily detailed but rather have the basics worked out: unique value proposition (UVP), ideal customer profile (ICP), and a functional website. Armed with these assets, most B2B PPC programs should be able to make positive contributions.
In our experience, paid media works for about 4-of-5 B2B companies with less than $500 million in annual sales. Above that company size, PPC is now a line item in every B2B marketing organization – along with events, PR, website management, content marketing, etc.
For a typical SMB, the more specific the offering, the better. For example, some specific areas where we’ve seen PPC make positive contributions are digital mailroom and self funded insurance. In both examples, buyers are actively shopping for solutions and the category is specific enough to facilitate straightforward PPC programs (under $25K month in budget).
Pro Tip: If a company doesn’t know precisely what it’s selling or to whom it’s selling to, PPC can work as a message testing tool but the KPIs need to reflect that. In other words, lead generation is off the table.
GROWING. The B2B advertising market is forecast to triple in size between 2019 and 2026 and it’s growing for a reason — because it works. Unlike our B2C brethren, most B2C managers do not spend much time thinking about awareness campaigns. For most of our budget, we need performance, and we need it quickly, and B2B PPC advertising can help with these requirements across the big three platforms: Google, LinkedIn, and Bing.
The tactic also punches well above its weight class. In a recent test with a mid-size B2B client, we paused digital advertising (or “went dark” in advertising parlance) for three months. In the prior year, PPC accounted for 20% of all inbound leads, measuring by first touch attribution. While dark, inbound lead volume decreased by 39%. PPC has the unique ability to help many other areas of the marketing operation perform better, even if it’s almost impossible to track without pausing the advertising altogether (or making steep investments in analytics capabilities, which is cost prohibitive for many SMBs).
That’s the good news about B2B advertising, and there’s plenty of it. The downsides? There are fewer greenfield opportunities where first mover advantage is achievable and when they do pop up, the opportunity window quickly closes. The secret is out. Categories get hyper-competitive quickly. Accounts and campaigns always required consistent care and tuning to be successful, but it’s even more challenging nowadays with more competitors deploying more sophisticated digital marketing strategies that are being regularly audited and aggressively improved.
Pro Tip: Start small. Many B2B marketing managers avoid PPC altogether because it can take a few months to show results and managing expectations can be hazardous. Launching with a modest budget and framing it as a pilot can keep it under the radar until the concept is proved out. Most B2B PPC agencies will accommodate a 90 pilot arrangement.
JOURNEYING. In a perfect world, we have a next-level understanding of the customer journey and nominal dollar value of every user interaction. But the world is imperfect and this goal is mostly aspirational, as even the few companies that do have a detailed understanding of the journey are constantly evolving their model, which are rife with assumptions to begin with. A cottage industry has emerged around B2B attribution modeling to help companies make improvements in this area but it’s an emerging discipline that’s still taking shape.
In the meantime, most B2B marketing managers need to figure out how to make it work on their own and getting focused on a handful of generally agreed-upon KPIs is the way to go. This can be as complicated as one wants to make it, but we B2B PPC professionals try to keep it simple and focus on actions like meeting requests, asset downloads, and event attendance. These are easily understood, core to most B2B marketing operations, and low or middle funnel actions that eventually lead to new business.
Pro Tip: Try to go Moneyball style and orient reporting around 1-2 KPIs like cost per lead (CPL) and cost per engaged website visitor (say, a visitor that clicks more than twice on the website).
SCALING. Consider the scenario: the PPC program had an outstanding year, making valuable contributions at the top, middle, and bottom of the funnel. A couple of paid media-sourced leads even resulted in quick turnaround wins (closed in fewer than 60 days) with big ticket new customers. Based on research, there’s plenty of additional high value keyword inventory to go after, so budgets are increased aggressively for the next year. Everyone wants more, especially the most senior sales and marketing managers, who talk about those big ticket quick wins in admiring ways with their executive peers.
In many ways, this is a great spot to be in. Asking for more budget after a successful year is a request senior managers are happy to accommodate. The rub: expectations were set using metrics from a breakout year, and B2B PPC experts know programs with less than ~$100K/month in budget in competitive categories are unlikely to scale at 1:1 levels. That is to say, cost per lead (CPL) and customer acquisition cost (CAC) are almost guaranteed to increase in these types of situations, when PPC budgets are increased aggressively. Combine this with known ROI windows of up to three years in the B2B world and it’s a recipe for not meeting expectations.
Pro Tip: More budget is almost always better because it’s easier to run a successful B2B PPC program with a bigger budget but problems arise when expectations aren’t established from the get-go. B2B PPC advertising programs don’t scale at a 1:1 rate when comparing investment and output and it takes a whole lot of education to spread this message.
MODELING. Saving maybe the most important factor on the list for last, the process of ROI modeling is where B2B PPC advertising programs get set up to succeed or fail. Best completed after a program has been up-and-running for awhile — at least 90 days but preferably a full year — there are only two core components required: lifetime customer value and lead-to-deal conversion metrics (average or media deal age). This assumes an integrated sales and marketing team, which is common at SMBs but might not be possible at large enterprises, where there will likely be other established metrics like cost-per-lead or cost-per-engagement metrics to be used for performance measurement. For companies with different business units and product lines and geographies, all with unique price points and profit margins, individual streams will be required.
Like in baseball or the financial markets, there is effectively no cap on how many metrics can be incorporated in a B2B attribution and modeling exercise. Rolling everything up to a lifetime customer value is maybe too idealistic but, if the option is available, it’s a simple metric that everyone can agree on. Example:
– Acme Corp sells corporate cleaning services for for $500,000 per year
– Acme’s profit margins for cleaning services is 35% or $175,000
– Acme’s customers usually stay for five years, totaling $875,000 in lifetime value
– The sales team historically converts 1-of-10 leads
– Lead value: at most, to break even, each lead is worth $87,500
– The likely acceptable direct cost of a lead is ~$10,000
– At this rate, the ROI of a $1,000,000 B2B PPC program would be 8.8X
– 10 new customers will deliver $8,750,000 in profits over 5 years
For a variety of reasons, most sizable B2B marketing organizations aren’t able to manage to a customer acquisition cost primary KPI. This is partly due to organizational behavior and partly due to operational complexity (disconnected systems, tracking challenges). It’s understandable: senior managers have spent years getting their functional areas optimized to deliver against legacy KPIs and no one is in a hurry to embrace new ones. That’s why the ROI modelling and KPI-setting process is so important to get right out of the gate. It’s not as simple as it seems but it’s critical to managing a successful B2B PPC program over the long term.
Pro Tip: Make sure to get at least 5% and preferably 10%+ of the budget carved out for testing and display advertising that might not show positive, direct ROI but are critical to maintaining the overall account and campaign health.
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Tim Bourgeois is a B2B PPC advertising consultant and leads the digital marketing audit services practice at East Coast Catalyst. He is based in Greater Boston.