The past 10 years has seen advertising go from somewhat of a “wing it and see” approach to more of a real science. Today’s marketer can pinpoint her ad dollars to places where she only pays for prospects that have expressed interest.
This kind of marketing is exciting and amazing. But if you don’t know what you’re doing, it can be a waste of money. The good news is that you don’t have to be overly Web-savvy to run a Google AdWords program or to buy a banner ad.
Below are the basics to get your started. Remember, you get what you pay for. So you’ll pay more for a true lead than you will for an impression or click. Read on…
Cost per impression (CPI)/cost per thousand (CPM)
CPI and CPM are essentially the same thing. In its simplest form, you are paying for every set of eyeballs that see your ad. The standard is to measure by the thousand, thus the “cost per thousand.”
Imagine if your highway billboard company had a way to measure every person that drove past your billboard. They would charge you a set fee for every 1,000 people that drove by. Translated to online ads, this means you’re charged a set fee for every 1,000 visits to the page of the Web site where your ad runs.
Those 1,000 visits don’t necessarily mean 1,000 different people. Several people may have visited the page numerous times. Just like the billboard company would count the same car twice, cost per impression counts repeat visitors.
CPI is still a cost-effective way to do brand advertising online. Depending on the targeting of the audience, you might pay around $15 to $30 for every 1,000 impressions—not a bad price to make an impression with a targeted advertisement. Just don’t expect a ton of suspects or prospects from this type of advertising. It is purely for branding, so make sure your expectations are reasonable.
Cost per click (CPC)/pay per click (PPC)
This type of advertising costs a little more, but that’s because it has entered your funnel as a suspect. Visitors to search engines will click on an ad that comes up in a search query. (I am sure you’ve all seen paid ads on the right or top of your Google search.)
Advertisers can buy keywords that potential customers may be searching for. For instance, if a college is offering a new biotech major, it could buy keywords around this major—and even in the targeted region of your choice. Someone doing a search for “colleges that offer biotech” may encounter your Google ad, click on the ad, then get transferred to your Web site—ideally, a custom landing page that caters to their needs.
Advertisers usually bid on keywords. The more popular the word, the more expensive it is. Let’s say the word is semi-popular. It might go for $2 per click. Any time anyone clicks on your ad, you pay Google $2.
The good news is that search engines such as Google don’t use only price to determine what ads go on top. Its algorithm will also scan your site and balance your listing with its relevancy and how much volume you purchase with the search engine.
The bad news is that you pay $2 for each visitor who clicks, even if they leave your site a second later and you don’t get the chance to capture the lead. In fact, it may actually take 30 people to click before you get one person to fill out a form. That translates into $60 cost per lead. This takes me to our next point.
Cost per lead (CPL)
You’ll invest the most with CPL advertising because you only pay for actual prospects, or “deep funnel” names. Unlike CPM (where you pay for the masses to see your ad), or CPC (where you pay for suspects to visit your site), with cost per lead advertising, you pay for prospective customers who fill out a form. These prospects most likely:
Searched online for your product
Explored Web sites for the product
Read info specifically about your company or school
And after all this, was still interested enough to fill out a request info form and give you their name, phone, number and e-mail address (if not more).
They are waiting for you to contact them.
Advertisers pay various amounts for CPL advertising depending on their product, demand, industry, closing ratio and profit margins. For instance, our new company, www.BackToLearn.com, helps colleges recruit adult learners. We charge $50 per lead. If a college can enroll two of every 10 prospects we send them, that means they paid $500 for two students.
Some college marketers have balked at our $50 per lead price. They say things like, “I can buy keywords on Google for $2 per person.” But if it takes 20, 30 or more clicks to generate one lead from your landing page, that means you’re paying $40to $60 per lead. So the price of keywords can be deceiving.
A click is not the same as a lead for your school. Though CPC advertising offers value, the price is cheaper because the person is higher up the funnel than a CPL prospect. That’s an important difference. The CPC person is a “suspect”; the CPL person is a “prospect.”
Whether it’s a Google keyword purchase, CPC campaign or traditional ad, you’re going to pay less with CPC because you still have work do to make that suspect a prospect. CPL leads are delivered to you ready to go as solid prospects. That’s why they’re worth the extra investment.
On top of all this, I suggest you keep in mind that though some online CPM, CPC and CPL programs are awesome additions to the advertising world, they are not the panacea as stand-alone campaigns. It would be a big mistake to drop all of your traditional advertising (TV, radio, print, etc.) and fly solo with online only marketing.
To have the most effective results, successful companies continue to use all these media to create a “surround sound” to their advertising message.
I hope this crash course helped you navigate the “cost per” world. If you have any questions, please feel free to e-mail me at david@nextSTEPmag.com, or call me at
(800) 771-3117 ext. 11.