What Is Pay-Per-Click (PPC) Advertising and How Does It Work?

Updated June 24, 2022

PPC advertising is a popular choice for search engine marketing. This is one of the most cost-effective ways to run an online marketing campaign. It's important to make sure your PPC campaigns are properly targeted and structured to get optimum results.

In this article, we explore what PPC advertising is and how you can use it to your benefit.

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What is PPC?

PPC stands for pay-per-click. This is a form of advertising where the advertiser pays a fee each time their ad receives a click from the user. Rather than pay a flat rate for ad placement, PPC costs money only when it's garnering attention and bringing visitors to your website.

Businesses bid for ad placement by entering their desired keywords into an automated auction. Using real-time bidding, the search engine determines which ads will show up for a user as that individual submits their search query. Companies pay a higher fee for a prominent ad within the search results for a popular keyword than they will if they're targeting a niche audience with a word or phrase that isn't used as often.

PPC advertising is also more affordable for companies that provide relevant and useful content. The more effective a business is at serving the needs of the user, the less a search engine will charge them to promote their products and services. A successful PPC campaign brings in more revenue than what the company pays for the ads. While the PPC campaign may cost $3 per click, the advertising should bring in many times that amount by converting those clicks into valuable sales both on the original visit and through repeat purchases.

Read more: Marketing's Promotional Mix: Definition and How To Use It

Why is PPC important?

PPC is one of the most popular forms of search engine advertising. This is an important option to explore because it only charges you for ads that are successful enough to receive a click from the viewer. If your advertising never garners a visit, you won't pay for it.

To make sure that PPC campaigns convert, you must thoughtfully design your landing page. Though you're not charged until a user clicks on your ad, you will still pay for visitors who bounce away from your site or visit without making a purchase.

Related: 7 Ways To Market a Small Business

6 steps to a successful PPC campaign

Here are six steps for setting up a successful PPC campaign:

1. Select your keywords

Evaluate the keywords that are relevant to your industry and the current campaign. Consider brand terms, product and service-related terms and even competitor terms. If you have a generous marketing budget, you can capture traffic from some searchers who are looking for competitor products by building a page that compares your brand to other top providers in your niche. Optimize this for competitor keywords and consider using it as part of your PPC campaign.

If you're looking for a more affordable approach to your PPC efforts, avoid competitor terms but do take a broad approach to your brainstorming. Consider related terms that can tie into your products and capture an as-yet untapped portion of your potential audience. For example, "pet health" and "dog weight" can relate to pet food sales.

Keyword selection is explained in further detail below. It's crucial that you select keywords that will help you reach your target audience at the moment when they're most interested in making a purchase.

2. Consider ad extensions

Ad extensions let you add more features to your ads, which can increase their performance. Consider some of the following:

  • Sitelink extension: Features multiple links from your website in the same ad

  • Call extension: Includes your business's phone number on the ad if the search happens during business hours

  • Location extension: Shows your physical address, phone number and map marker

  • Affiliate location extension: Lists nearby stores that carry your products

  • Review extension: Highlight awards, reviews or third-party rankings

  • Message extension: Provides a link to immediately send a text to your company

  • Price extension: Features the price with specific products

  • Callout extension: Allows you to call out specific selling points for your products or services

  • Structured snippet extension: Allows you to select a header topic such as amenities or brands and include related details in the search results

  • App extension: Provide a link for the user to get your app

3. Set your budget

Carefully evaluate your cost per click (CPC) and determine how much you can pay for your PPC campaign. You can determine the appropriate price for each click using your average profit per customer, conversion rate and profit margin. Multiply these factors using the following calculation:

[Avg. profit per customer] * (1 - [profit margin]) * [conversion rate] = Maximum CPC

It's important to understand and assess the difference between what you pay upfront for a click and what you ultimately gain from it. If you pay $3 for a click that leads to $300 in sales, you're enjoying great profits from that customer. However, not every $3 click will yield a sale of that size or any sale at all. Evaluating your average conversion rate and profit per customer will give you a clearer idea of what you can afford to invest in your PPC campaign.

4. Create quality landing pages

Develop landing pages that are highly relevant to the search terms you're targeting. The more useful your page is, the less you'll pay for your clicks. A relevant and carefully targeted landing page also helps you increase conversions.

If you're targeting "pet health" for your pet food company, the related landing page should detail ways that you can support your pet's health. This will include supporting their health with a quality diet, but it should have other information as well so you're offering real value to your visitors and establishing your company as a thought leader and reliable resource in your industry.

5. Craft your advertising

Your ad will typically include a title, URL and ad copy. Craft your copy mindfully, so you can capture the viewer's attention and efficiently highlight your products or services. You have limited space for your ad copy, so make sure to include your unique service proposition and call to action. Use your targeted keywords and related keywords here as well.

6. Place your bids

Bid on the keywords that you identified in the first step of the process staying within the budget that you previously defined. You can set up automatic bidding to adjust your bid depending on the parameters of the search, such as the cost per acquisition and conversion rate.

Use bid modifiers to target your ads to a more specific audience. This will also help you win bids on a smaller budget. For example, you might bid on ads that will appear exclusively on mobile devices or only on computers.

Related: Learn About Being a Digital Marketing Manager

Elements of effective PPC keyword lists

Keyword selection is crucial for success with PPC campaigns. Consider the following elements carefully to make sure you're picking the most effective keywords for your needs:

  • Relevance: Only use keywords that are relevant to your products and services. While dog food may have a high search volume, this isn't a relevant keyword for your pet sitting services. You may reach dog owners, but the ones who see your advertising probably aren't looking for a pet sitter. The more relevant your page is to the needs of the searcher, the more cost-effective your PPC campaign will be.

  • Volume: Compare search volume for the words and phrases most relevant to your offerings. You should balance the obvious benefits of high volume with the affordability of terms that have a lower volume. Phrases with a lower search volume may also help you reach a niche audience that's more likely to convert.

  • Competition: Find out what your top competitors are ranking for and look for ways to distinguish your campaign. If possible, find underutilized keywords that will target an underserved portion of the market.

  • Likelihood of conversion: Consider what the searcher is looking for when they enter a particular search term. Some keywords may indicate that the searcher is only in the research phase of their journey rather than the purchasing phrase. For example, "car parts" indicates less intent than "2010 Chevy Malibu fuel line."

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How to manage PPC campaigns

Once you've set up your PPC campaigns, it's important to mindfully manage them so they can continue to perform well for you. Follow these four steps to manage your campaigns successfully:

1. Use multiple campaigns at once

There's no reason to finish one campaign before you begin another. Run several campaigns simultaneously to increase your chances of showing up in search results. Diversify your campaigns to reach a broader audience overall. For example, you might use a mobile-only ad bid that includes a location extension and product-specific keyword to help shoppers find your store while they're out searching for a specific item. Another campaign may target computer shoppers who are in the research phase by using a related keyword that will help them learn more about your ingredients and manufacturing process.

2. Manage your landing pages

Make sure the landing pages for your PPC campaigns are properly managed. These pages should never be out of date. If your products or services change, you must update your landing pages immediately. You can also optimize your campaigns by updating your landing pages with the latest promotions or seasonal products. You might maintain the same campaign targeted to coupon-related keywords but update the landing page weekly so it always offers current deals.

3. Track your results

Carefully evaluate your PPC campaigns to see how they're performing. You can use A/B testing to compare two similar keywords before settling on the choice that you'll put more funds, marketing materials and effort behind. Use the information you gather from your PPC campaigns to adjust your sales and marketing strategies for more effectiveness going forward. Place more emphasis on the keywords that get the highest conversion rates and consider eliminating those with high bounce rates. Focusing on analytics will help you create more effective campaigns for the future.

4. Practice remarketing

Remarketing serves targeted ads to customers who have already visited your page. Analyze the needs of visitors who spent time on your page but didn't convert into a sale. Develop PPC campaigns targeted to those needs to recapture these individuals. Remarketing campaigns will place your products and services in front of previous visitors continuously, so your brand stays at the front of their minds and is a likely contender when they're ready to make a purchase.

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