Which Is Better: PPC or PPL Marketing?

For small businesses, significant spending needs to be justifiable. This holds true even for necessary expenditures, such as marketing and advertising.

With thousands of dollars at stake in your marketing budget each year, you need to choose advertising strategies and channels that result in a positive ROI.

One of the essential questions in modern advertising is whether to use pay-per-click (PPC) or pay-per-lead (PPL) advertising to generate new business.

I'll make the decision easy for you: You can use both methods...at the same time!

You're welcome, marketers! No more late night, nail-biting decisions over whether to drop one lead generation program in favor of the other.

In fact, many software vendors who work with Gartner Digital Markets (comprising Capterra, GetApp, and Software Advice) can—and do—participate in both PPL and PPC programs. And they often conduct multiple ongoing campaigns in each.

However, there are aspects of both methods that software vendors need to be aware of before running full-fledged campaigns.

In this piece, I'll discuss the basics of each advertising program, as well as a few prerequisites for getting started.

The ins and outs of PPC and PPL advertising

There are different requirements and benefits that accompany PPC and PPL advertising. Let's take a look at each so you can make sure you have everything you need before starting your campaigns.

PPC advertising

One of the biggest selling points for PPC is that a vendor can start a campaign and generate leads in just a few minutes. But, though the speed of lead acquisition is appealing, your website has to be able to convert that traffic at a similarly high rate.

You should also make sure you have the following key elements set up to ensure that your PPC campaign is successful:

• An optimized website and/or dedicated landing pages

• Conversion and referral tracking tools

• A clearly defined target market

• A clearly defined sales process

Creating optimized websites and landing pages

If you don't know how to create an online form or don't have a web designer to help make the changes you need, there are tons of tools for website and landing page optimization to get you started.

It's not difficult to develop a moderately optimized page, but it's an absolute must before starting a PPC campaign. Otherwise, you're not giving your prospects a place to leave their information so your sales team can get back to them to pitch your product.

Tracking your campaigns

PPC tracking is relatively easy with the right tools. Unfortunately, many vendors aren't tracking paid traffic, so they don't know if the money they're pumping into campaigns is worth it.

You can track your campaigns through a free tool, such as Google Analytics, or via any of the hundreds of web analytics or campaign tracking tools on the market.

Understanding your target market

When you start a new PPC campaign, it's important to know your market. Vendors often target keywords that are too expensive or broad for their target audience.

PPC is a great tool for reaching niche markets, but only if you limit your campaign to reach those particular people. You should also refrain from reaching for expensive clicks outside your primary target market—or outside your budget.

Creating a clearly defined sales process

Accumulating leads is all well and good, but you have to sell to those leads to be successful.

If you're conducting a PPC advertising campaign through the right channels, you could have hundreds of leads coming your way. But if you don't have a defined sales process—assigning leads to the right person or team, qualifying them, and contacting them immediately—then you're wasting your money.

Equipping your team with a CRM or similar tool can go a long way toward organizing your pipeline and gathering the leads from your successful ad campaigns in one place.

PPL advertising

Pay per lead is a great choice for the vast majority of software companies. By operating through PPL channels, software companies subscribe to a service and, in one way or another, purchase individual leads.

The volume of leads you'll receive will be lower—and their price will be higher—than a PPC campaign because each lead has been pre-qualified by a third party, knocking out some of the legwork for your sales team.

As with PPC, there are a few things you should have in place before starting your PPL campaign:

• The price you're willing to pay (on average) for a lead

• A functional sales team

What your organization should pay per lead

While it's exciting to think of all the information you'll acquire from your PPL leads, you're still operating on a marketing or advertising budget. That means you have to figure out which leads make financial sense for you.

One general rule of thumb to determine your average cost per lead is to consider the amount you'd be willing to spend to acquire a customer.

As a model, imagine that the lifetime value of your customer is around $10,000. To gain another $10,000 customer, you might be willing to spend around 10% of the total lifetime value ($1,000). That $1,000 is the cost per acquisition (CPA).

The next part of this formula is dependent on your sales team. If they typically close 10% of all incoming leads (close rate), multiply that by your CPA (10% x $1,000). The resulting $100 is an average cost per lead (CPL) estimate.

Multiply your acceptable CPA by your close rate to find your estimated average cost per lead

When evaluating the effectiveness of PPL programs for your company, keep these numbers in mind to decide whether you're spending too much on your leads. And remember that these metrics all fluctuate over time.

Monitor your leads to see if your average CPL is holding true and your close rates are within the norm. If the leads seem too expensive, work with your sales team to increase your close rates, review your pricing structure, or drop the PPL source.

Set your sales team up for success

The logic behind a sales team for PPL is the same as the logic behind PPC: If no one is following up with your leads, they're worthless to your company.

While the volume of leads from PPL will be more manageable for a smaller sales team than the leads coming in from PPC campaigns, your sales team still needs to be on top of their follow-up game. And equipping your team with a CRM is never a bad idea.

Go get those leads

Whether PPC or PPL advertising is better is totally up to your company, product, and sales team. Both ad models have unique benefits and requirements. As you saw above, the best part is that you don't have to choose between the two.

Running both types of campaigns is completely doable. And it's pretty much the norm with many of our customers at Gartner Digital Markets.

If you're a software vendor looking to get more leads, there are many viable channels out there, including ours. You can set up PPC and PPL advertising campaigns with us if you're ready to get started.

What's working for you?

What types of advertising campaigns have worked out well for your B2B company? What strategies have you used to make your PPC or PPL campaigns more successful? Let us know in the comments below, or give me a shout on Twitter @CapterraKelsie.