PPC advertising is the fastest road to generating leads for highly competitive keywords.
To understand how much to spend on a PPC lead, you must first identify and calculate your Cost Per Action – the action you want a visitor to take.
Pay-per-click (PPC) advertising is an effective way to generate website traffic. PPC is, in fact, the fastest road to being on Google’s first page for relevant search results, especially for highly competitive keywords. But how much should you pay? And how much are your competitors paying? Great questions but there is no short answer.
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Why is There No Accurate Cost Per Action Benchmark Data?
Many variables affect the CPA and it can be tricky to determine a benchmark because:
- Desired user actions vary by client.
- No standard CPA conversion rate exists.
- Advertisers can measure a variety of actions as the CPA such as a phone call or completed lead form.
What Do Our Competitors Pay for a Lead?
Many B2B companies determine a conversion (CPA goal) when a user reaches a “thank you” page. But they can (and do) also measure a conversion as when a person leaves a landing page and enters the Products section of a website (even if they don’t fill out a form), or stays on the site for a certain length of time, or watches a video on the landing page.
Ad Networks do not divulge competitor CPA, their traffic count, number of conversions or what they pay for them. There are software programs that say they offer competitor data, but save your money, we have found them to be completely unreliable.
Even if the ad networks provided a competitor CPA figure, we would not know what they were counting as a lead.
After an extensive search to locate a B2B cost-per-lead benchmark, we found one B2B cost-per-action example for Marketo. In 2011, they were paying $73/lead. A well-known brand around since 2007, Marketo dives further into the topic in its Marketing Metrics & Analytics guide.
The many factors affecting the CPA within an advertising account include:
- Keyword mix: CPAs vary greatly based on brand versus non-brand keywords and broad versus long-tail keyword choices. Why should you bid on brand terms?
- Ad Network distribution: Search, Search Networks, Display Networks and Remarketing—they have different expected conversion costs. Display is meant to be a top-of-the-funnel awareness program. It can drive a lot of visitors at a low cost but it often has a higher CPA because user intent is not there in the same way as it is for Search campaigns.
- Geographic locations: The same keywords running in the U.S. will likely be cheaper when compared to say Australia, Canada or the UK.
- Offer type: A white paper will often produce a much cheaper CPA than a product demo request form, but a prospect who requests a demo is a much better lead so a higher cost is warranted. And a demo request is a great lead type for Sales. Some prospects will call Sales rather than completing a form. With call-tracking software, we can track this call as a lead associated with the ad campaign.
- Competitive campaigns: We often use broad match to pick up competitor search queries but if we want to go head to head against a top competitor then CPAs could easily be as high as $300.
- Offer keywords: When the keywords and ads are a good match for the landing page offer and the offer is something people want, CPAs are lower. Often clients request bidding on broad keywords when there is no matching offer and this results in paying more for the lead.
- Timing: CPAs fluctuate during periods of heavy offer/ad testing and by seasons and holidays.
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What Should Your CPA Be?
Long Sales Cycles: B2B is tricky. Many people are involved in the research and purchase decision, and leads can take a long time to surface as qualified prospects. A long sales cycle – involving multiple people – also makes it difficult to know precisely which marketing program generated the lead.
Product Cost: The cost of the advertiser’s product has a big impact on what they should be paying for a conversion. A company selling a $10K product should expect to pay a lower CPA than a company selling a $100K product.
Lead Actions: Campaigns can have multiple CPAs depending on the type of lead action. A phone call or a request for a demo may be valued at $250/ea while a white paper download is valued at $75/ea.
The CPA for our B2B clients ranges from $20/lead to $300/lead. We think the better question to ask is “can we bring in profitable leads that will generate ongoing revenue for the company?“.
To help you identify what your CPA dollar range should be for 2015, start by answering the following questions:
- How many sales came from paid media in 2014?
- How much revenue did those deals generate?
- How many leads came from paid media?
- How much was total paid media cost?