Business-to-business (B2B) companies can find a lot of success in PPC advertising, but the way they measure success can be the difference between thinking a PPC campaign is not worth the effort to realizing its true, long-term value.
In this post, I’ll walk you through the one thing you may not be tracking as a B2B company and how it can change the way you view PPC performance forever.
How B2Bs Typically Track PPC Value
B2Bs like to track PPC conversions in different ways. A popular way is to enable conversion tracking in AdWords and assign a dollar amount to a conversion action like a download, signing up for a webinar, requesting a demo, or some other common B2B touch point — essentially looking at how much a lead is worth to your business. Tracking performance in Google Analytics is key, too.
Another way Google is enabling reporting for B2Bs is to allow the tracking of offline conversions — which, in a B2B environment, is typically where the bulk of the deeper conversions happen that turn prospects into sales.
B2B Conversion Tracking: What’s Missing?
Because PPC is so measurable and quantifiable, we sometimes become very reliant on the data we see in the reports just mentioned. While this data is crucial, it doesn’t necessarily paint the full picture of your campaign success.
Even if you’re tracking offline sales diligently, there’s another factor you can consider when deciding how much budget you should allocate to the paid search channel or when evaluating the ROI of your current campaigns: the lifetime value of a customer.
Lifetime Value Of A Customer: What Is It?
In a nutshell, the customer lifetime value (CLV) forecasts the full scope of value derived by a single client during the span of the relationship between that client and the company.
This will differ by business and take into account many factors, and there are lots of equations out there to help you calculate customer lifetime value. Here’s a tool from Harvard Business School that can get you thinking in these terms.
Getting a rough idea of your average customer lifetime value can help you understand how far your PPC budget will stretch as a B2B company. It can also get you to start thinking in terms of future revenue and not just immediate results (one side effect that the instant gratification of PPC creates).
While it may be simpler to calculate customer lifetime value as an e-commerce retailer, it’s still possible to do in the B2B sector — it’s just not as so cut-and-dry.
B2B Customer Lifetime Value: A Real-World Example
We recently started with a client that provides professional services in the fashion and beauty sector. This client had a modest budget and wanted to invest on the low end of the spectrum into PPC advertising.
That low end of the spectrum — let’s call it $1,500 a month for the purposes of this example — happened to be exact cost of the service package they were selling: $1,500. This client only requested that we generate one client per month with that PPC budget.
At face value, it would seem that this client would be only breaking even with PPC — but that was before we discussed the lifetime value of the customer.
As it turns out, a new client would invest in their startup service package (the $1,500 one) but would often turn into an ongoing customer afterwards, staying with them for at least a few more months on average and up to a few years in some cases.
What’s more, if their client did leave, they’d usually come back within a couple years to engage with more services (so the return rate was high). To top it off, each client would generate one new client for the business on average through a referral. These referrals from pre-existing clients would be considerably less effort to acquire, court, and onboard, too!
The Moral Of The Story? Think Bigger.
When we looked at this client’s “modest” PPC budget from a different angle, we found it wasn’t so small after all, because the potential for value over time was high.
When we only look at the face value of the data in PPC, we’re missing the big picture. This is especially true of B2Bs who so often don’t connect the dots beyond the initial B2B PPC conversion or even beyond the initial sale.
Maybe you’re thinking that you can’t afford PPC because your low-end budget won’t generate ROI, or perhaps you’re ready to pause a campaign because it looks like you’re only breaking even or your cost-per-acquisition is too high.
Before you do any of that, as a B2B advertiser, take a look at the lifetime value of your clients. You might be surprised at the hidden profits that are lurking just below the surface.
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