Is Pay-Per-Click (PPC) The Best Use Of Your Marketing Budget?

For years, pay-per-click ads have been a fallback for businesses that want to drive sales online. The medium offers controlled spending and traceable returns, making it attractive to marketers used to more traditional forms of advertising.

But while it would be foolish to claim that PPC is dying (Google can’t let their primary revenue stream bleed out on the table), all is not well in the pay-per-click space.

Google’s earnings report from earlier this month revealed that the average cost per click decreased by 15%—and that’s not because they’re giving away more impressions for less. As users increasingly migrate to mobile platforms, it’s getting tougher for Google to make money on ads. Businesses simply aren’t willing to pay the same cost per click, while overall returns seem to diminish.

The Trouble With Pay-Per-Click

The discouraging reality is that even if a click drives a user to your website, there’s no guarantee that the visitor will follow through to sale. The consumer is still relatively high in the funnel at this point in the process, despite the business having paid for that lead. Businesses wind up scraping for window shoppers, many of whose sole motivation to purchase is lowest price.

Like many other forms of “push” marketing gone before, PPC ads are also being tuned out by an over-stimulated generation that has learned to distrust or ignore blatant advertising.

The most recent Nielsen Global Trust in Advertising report found that 40% of respondents trusted ads served in search results, 33% trusted online banner ads, and a mere 29% trusted text ads on mobile phones. Ouch.

PPC Advertising Has A Silver Lining

PPC still has its own redeeming factors. The fact remains that well-structured PPC campaigns generate a considerable number of leads and sales. Regardless the varying trust levels for PPC, careful planning and execution allow marketers the ability to reduce waste spend, reach their target market with a well crafted message, precisely when the consumer is evaluating options. These practices in tandem with a businesses ability to remarket content to previous ad visitors, significantly improves conversion rates.

For generating quick, measureable results that get in front of your market, PPC is still a strong option—yet, an expensive one. That said, earnings report numbers hint at the underlying challenges in tracking that success with PPC.

This begs the question: while PPC ads might be one way to generate leads and potential sales, are they the best way to spend your marketing budget?

Referral Marketing: A Viable Alternative

If your business is unwilling to allocate budget towards a click campaign unable to guarantee results, where is the smart money? Unsurprisingly, word of mouth. After all, doesn’t it make more sense to pay per sale,while offering perks to existing customers in the process?

Your business may not have an enormous budget for PPC, but what you likely DO have is a core group of devoted customers. Incentivizing that core group to refer their circle of friends can yield dividends beyond the reaches of pay-per-click ads.

Referrals Win Customers Over—The Proof Is In The Numbers

According to the New York Times, 65% of new business comes from referrals. Even more compelling, the same Nielsen study mentioned earlier, showed that 92% of respondents trusted referrals from people they knew, with 70% trusting consumer opinions posted online. People are also 4 times more likely to buy when referred by a friend, and the Wharton School of Business found that the lifetime value of a new referral customer would be 16% higher.

The opportunity is there—but businesses often fail to capitalize. A Texas Tech Marketing Study found that 83% of consumers are willing to refer after a positive experience—yet only 29% actually do. Imagine the potential returns if budget were allocated to turning these happy and willing customers into brand ambassadors!

Go To Where Your Market Is

Unlike other forms of advertising, the effectiveness of genuine word-of-mouth will likely remain the same. People trust those they know because their relationships are exterior to any business or brand, therefore, a referral isn’t seen as advertising. Those relationships transcend technology—and, changes to mobile and social platforms will only make referring businesses to friends that much easier…not so, for advertising.

What do you think? Does referral marketing deserve more of your attention—and budget?