Whenever a B2B business owner hears that I run a paid search management agency, it almost always evokes the same response: “AdWords doesn’t work for B2B businesses!”
I’ve heard countless stories of wasted budgets and fruitless campaigns. Sometimes, the figures are staggering. One CEO I met a few months back had spent over $148,000 on AdWords…and had nothing to show for it.
His story isn’t unique, either. Over the past few years, I’ve reviewed more than 350 B2B paid search accounts. In most of them, their AdWords spend is about as effective as lighting money on fire.
However, even after auditing all of those AdWords accounts, I still believe that AdWords is one of the best ways to grow a B2B business. In fact, I get excited every time we get a new B2B client because I know we’re going to kill it for their business.
But the question is, if AdWords is such a great B2B advertising platform, why do so many companies struggle to turn a profit on AdWords?
Why AdWords Can Work Especially Well for B2B Businesses
B2B businesses that win on AdWords succeed by taking advantage of their customer lifetime value (LTV).
Using Your Lifetime Value
In B2C advertising, the value of a sale is fairly low. For example, if you are an e-commerce business, your average transaction is probably worth $85-120. Factor in repeat business and you might have a customer LTV of $300. In contrast, many B2B companies have an LTV ranging from $10,000 to well over $100,000—giving them a lot more profit margin to play with.
So, if you’re a B2C e-commerce company with a 25% profit margin that makes $300 per customer, your cost-per-sale needs to be $75 just to break even. Compare that with a B2B company that has an average customer LTV of $30,000 and a profit margin of 25%.
Even if it costs $1,500 to close a sale (20x the cost-per-sale of the B2C company), the B2B company will still make $6,000 in profit. That’s a huge difference!
Because the customer LTV for B2B businesses is so high, B2B companies can afford to rapidly test a variety of paid search campaigns, keywords, and ads.
After all, their profit margin can handle a few failures.
As a result, B2C business often struggle for years to incrementally improve the profitability of their campaigns. It’s slow, it’s painful, but it works. On the other hand, B2B companies can spend a little extra money to quickly find their ideal paid search strategy, dial in their campaigns and maximize their profits.
About a year ago, we launched an AdWords account for a company in the B2B space. Each new client was worth anywhere from $1,000 to over $10,000 in profit, but they didn’t have a particularly high close rate, so the company was hoping to get leads for $150 a pop.
Since we knew we had a fairly large profit margin to work with, we started off with 23 campaigns, 451 keywords, 139 ad groups and 374 ads.
Now, if you’ve read any of my other articles here on SEJ, you know that I’m not a fan of massive accounts. However, in this case, the initial goal wasn’t to create a simple, efficient account—we wanted to figure out what worked, and we wanted to do it quickly.
Here’s what happened:
Initially, the client’s cost-per-lead was over $280. Obviously, that was too high for the client, but we learned a ton from our experiment. We started eliminating campaigns and keywords and changing ad groups, ad copy, and our landing pages to maximize lead flow.
Within a month, we had dropped their cost-per-lead to just over $150. After two months, their cost-per-lead was less than $75.
So, by using their profit margin to quickly optimize their paid search strategy, we were able to produce leads from AdWords at one-half their “ideal” cost-per-lead. The AdWords campaigns were so effective, in fact, that the company went through an unprecedented growth phase and received millions in VC funding.
Why B2B Companies Have a Hard Time Using AdWords Effectively
Now, most B2B companies don’t get these sorts of results. The question is, why?
To be honest, it all boils down to understanding your audience. You need to know how your target audience is looking for you and what they are looking for.
Targeting a Niche Audience
B2C targeting is fairly simple. In my experience, most B2C advertisers know which keywords to target before they even start advertising.
B2B targeting, on the other hand, isn’t quite so straightforward.
Unfortunately, most B2B companies approach keyword targeting like a B2C company. They bid on keywords that seem generally related to their product or offer, write a few ads, and wait for the traffic to roll in.
For example, remember that company I mentioned that wasted over $148,000 on AdWords? They were bidding on the broad match keyword “translate.” Now, this business offered B2B translation services, so “translate” seemed like an ideal keyword. It was relevant to their business, and it is searched over 150,000,000 times a month.
Yes, that’s 150 million searches per month.
The only problem is, most searches for “translate”-related terms don’t come from people who want B2B translation services. Of course, that won’t stop them from clicking on an ad from a B2B translation service…but they certainly won’t convert.
As relevant as bidding on “translate” seemed, after spending over $50,000 on the keyword, this company still didn’t have a single conversion to show for it. Sure, they got plenty of clicks. But, because they were targeting the wrong traffic, no one ever converted.
Fortunately, there is a simple fix for this problem—stop bidding on keywords that don’t convert!
To show you how this works, let’s take a look at some data from a B2B client of ours who works in the financial industry. Originally, they were bidding on a lot of keywords that weren’t producing conversions.
Here’s what happened when we stopped bidding on those keywords:
After we quit wasting money on the wrong keywords, our click volume decreased dramatically. However, conversions stayed about the same.
As a result, the client’s cost-per-conversion (which matters a lot more than cost-per-click) dropped through the floor:
Same number of conversions for a lot less money? Sounds like a win to me.
Using the Wrong Messaging
Unfortunately, in many cases, keyword optimization alone isn’t enough to ensure that your paid search campaigns will yield profitable results—your ads and landing pages need to strike a chord with your target audience. The only problem is, most businesses assume that their potential customers care about what they care about.
Sadly, that isn’t true.
Most people don’t care about your features. They have a problem and they want you to solve it.
So, if you want the right kind of people to click on your paid search ads and convert, your ad copy and landing page don’t need to address every possible need or pain point—just the one that triggered your ad.
Do it right and your audience will self-identify with your ad and only people who are interested in your product or offer will click. Do it wrong and, well, you might as well set your budget on fire…
Remember that financing client we were just talking about? Well, cutting out their useless keywords significantly improved their cost-per-conversion, but they were still getting a lot of irrelevant traffic from car salesmen and retailers.
To fix this, we changed our ad copy.
Our target audience was searching online for a specific type of financing option, so we called out our target audience and what they were interested in with our copy. Basically, it looked something like this (we’ll use car salesmen in our example to preserve client privacy):
By combining keyword and ad optimization (along with a few landing page tricks), we were able to build up their campaigns until they were producing 9x as many leads on just 48% more ad spend.
And…guess what? AdWords is now their biggest source of leads and sales!
While it’s true that many B2B businesses burn more money on AdWords than they make, AdWords is one of the best ways to market your B2B company.
The trick is to leverage your profit margin to identify the keywords that matter most to your company. Once you’ve done that, you just need to create ad copy that resonates with your target audience’s search intent and use that search intent to qualify your clicks—easy, right?
Okay, so it’s probably easier said than done, but if you follow the recommendations in this article, you’ll be well on your way to building incredibly effective AdWords campaigns for your B2B business.
Does this ring true for you? Are there any tricks that you use to improve the performance of your B2B paid search campaigns?