B2B Marketing use of Pay-per-click

A great post on B2B marketing and pay-per-click (PPC) advertising, called “Don’t sabotage your own PPC Campaign“ at the Emagine blog.  The post, by Matt Roche, highlights an interview with CPC search’s Terry Whalen carried out by Jep Capelstein at the LeadSloth blog.  In the original interview, Terry Whalen discusses how B2B use of pay-per-click differs from B2C.  He makes some good points e.g. the search volumes are usually lower for B2B so it can take a little time to draw good conclusions on things like overall lead quality and Return on Investment. The Emagine post summarises the interview and then adds a few comments, one of which in particular I think is worth quoting, as it refers to the underfunding of B2B campaigns, which I think is likely to be an issue for a lot of tech marketers.  Here’s the quote:

“Too often we see good B2B clients struggling under mandated PPC budgets in the $1,000/month range …which gets them maybe 3-5 leads a month, for some big-ticket, highly-considered products or services.  But to get the one or two solid sales leads per month that the CMO probably wants, something more in the range of 100 raw leads/month is needed.  To see how that budget constraint is in fact hindering growth:  if even one of those two solid leads closes, at a modest high-ticket price of $100K and profit margin of 15% (which included the budgeted $1,000), clearly the extra $9K spent to obtain those 2 solid leads (@$100/click) is covered …with room to spare.  If your situation is this good or better (and being sure about it is why the ROI numbers are so vital), then clearly you should be throwing as much money as possible into PPC …until/unless you can come up with a demonstrably higher-leverage marketing tool.”

I’m not focused on the precise  figures quoted by Matt Roche here for the monthly B2B Pay-per-click budgets ($1k per month seems very low), but I am interested in the general principle – when and how do you decide you’re spending enough on PPC?  To make a good decision, you’ll have to know how many sales you’ve made out of PPC generated leads over some period – which means you have to track this accurately.  (This probably seems easy but it may not be – do you record the original lead source against every sale you make? Is there more than one source for that sale? – If so which one(s) gets the credit for the sale?).  You should also be able to compare the cost of the PPC generated leads with those from other sources e.g. organic web-traffic leads or email leads.  So it could all get a bit complicated.

But as a first cut, and here’s where I’m in strong agreement with Matt Roche, you can probably make some simple decisions.  If you knew that a third of your sales, say $10x dollars, came from PPC, which costs you $1x dollars, then it’s worth checking whether investing $2x dollars in PPC will generate $20x sales.  If so, and your margins are sufficient, the decision on investing more in PPC should be fairly easy.  It would then seem sensible to keep increasing the PPC spend until you stop getting a corresponding increase leads and sales.  (If there’s a big flaw in this logic, please post a comment, I’m interested to hear what others think about the issue of setting PPC budgets in B2B Marketing).

This subject also leads to a larger question of budgeting for lead generation/marketing and the relative allocation of budget across various marketing and lead generation activities, which I hope to tackle in a future post.