For industrial B2B marketing, pay-per-click (PPC) advertising is an effective way to get technical and complex products in front of an already interested audience. We’ve written about it before, but PPC campaigns allow industrial businesses, who are sometimes skeptical of advertising, to easily track ROI from individual campaigns and monitor the impacts each campaign is having on lead generation.

Sounds pretty good, right? It can be, if set up and optimized properly.

While there are many factors which combine to contribute to B2B marketing ad success, budget is one of the most important – and misunderstood. Campaigns with excellent keywords, compelling calls to action, and effective landing pages are wasted if there isn’t enough of a budget to perform at a high level.  Ads which display in the top results receive the majority of clicks. Campaigns with insufficient budgets will display at less popular times and on the ‘back pages’, generating fewer clicks, or worse, clicks from less qualified visitors.

So where to start?

For B2B businesses, a PPC budget begins with setting goals. The industrial sales cycle is traditionally longer than B2C sales, meaning that customers are less likely to make a purchase immediately after clicking an advertisement. However, they are willing to provide contact information, by filling out a form or downloading content that will offer more information about a product or service. For industrial businesses, a well designed PPC campaign should generate qualified leads, not immediate sales. With this in mind, industrial businesses need to determine what a sales lead is worth to their business and decide how many leads will justify their PPC investments.

Once a goal has been established, it is important to understand the B2B conversion rate for PPC advertising. Google estimates that 1-2% of all PPC clicks for B2B businesses will convert. Therefore, consider the following calculation:

Goal/Conversion Rate = Clicks Needed

Let’s use an industrial equipment dealership as an example. The dealership sells large equipment and each sale has a high value. As a result, they decide that 6 new leads per month from their PPC advertising campaigns would be worthwhile. The calculation is as follows for a good 2% conversion rate:

6/0.02=300

Based on this calculation the dealership will need to generate about 300 clicks to get 6 leads per month.

Once the number of clicks needed to generate leads has been calculated, it is time to figure out the average cost-per-click for the keywords which have been chosen. For new campaigns, the estimated average cost-per-click for search terms can be found using Google Keyword Planner. For existing campaigns, the average cost per click over the past weeks or months can be displayed in the AdWords dashboard. With the average cost per click, use the following calculation to determine budget:

Clicks Needed x Average Cost Per Click= Budget

For our industrial equipment dealership, let’s say the average cost per click for the terms they are bidding on is $3.50. Therefore:

300 x 3.50=$1050

To generate 6 leads per month it is estimated that our industrial equipment dealership will need to spend roughly $1050 on their AdWords campaigns. In large equipment sales, if even one of these leads becomes a customer every few months, then the campaigns have been a success.

It is important to remember that these numbers are just estimates. Depending on the industry, keywords, geographic area and especially the competition for those keywords, the required budget can vary drastically. While these calculations provide no guaranteed results, they are useful for understanding PPC budgeting and setting realistic B2B marketing expectations.

To further improve ROI from paid advertising campaigns consider using marketing technology to determine which companies are visiting a website from PPC campaigns, even if they don’t convert. This can have a dramatic impact (up to 5x more) on the value of each advertising click, by increasing the number of leads available. Remember, companies clicking on PPC ads searched for terms related to the ad in the first place. Knowing that there is interest from a company, even if they didn’t convert, makes it much easier for a sales team to reach out.

Returning to our industrial equipment dealer example, from those same 300 clicks, marketing technology might identify 30 (6×5) companies who visited a website through a paid advertisement. The cost per lead is now:

$1050/30=$35 compared to $1050/6=$175

As B2B buyers spend more time online, many industrial businesses are already leveraging both AdWords and marketing technology to discover new leads who have expressed interest in their products or services.