How Does Pay Per Click Work? – A Beginner’s Guide

If you’ve just started advertising your business online or want to develop your current campaign, online marketing can be fraught with confusion. Before customers can see what your business has to offer, they need to know your business exists! With so much competition, it can take years of hard graft to stand out in the online marketplace.

One of the best ways to get seen by consumers and drive new sales is through pay per click (PPC) advertising. Whilst organic advertising takes time to develop, the effects of PPC are immediate. That’s because they put your business directly into the line of sight of potential customers. According to the State of PPC Report 2019/2020, 74% of brands say that PPC is a major driver for their business.

So, how does pay per click work? In this article, we’ll take you through exactly how PPC works, the benefits of using PPC advertising, and how to implement it within your wider marketing strategy to maximise conversions.

What is PPC advertising?

Pay per click is a popular form of online advertising which drives traffic to your website through sponsored ads on search engines and social media platforms, such as Google, Facebook and LinkedIn. It’s called Pay Per Click for an obvious reason – you pay the advertising platform a certain (usually relatively small) amount of money for each click you get on the sponsored advertisement.

How does pay per click work?

PPC advertising works like an auction, in which you bid for certain keywords. Utilising the terms your potential customers use to search for products and services can drastically improve your brand’s visibility. For example, if you own a women’s ethical footwear brand, then ‘vegan high heels’ might be an important key phrase for your business.

The order and pricing of a PPC advert rests on several factors. The first is your maximum cost per click (Max CPC). This is the maximum amount you are willing to pay for an advertisement. It’s important to note that this will not necessarily be the amount you pay, only your maximum.

The other factor is the ad’s Quality Score. This is calculated based on several factors including the potential click-through rate, the relevancy of the ad to the customer’s search, and the customer experience of your landing page that the ad sends customers to. This Ad Rank is calculated approximately using this formula:

Ad Rank = Quality Score x Max CPC

Cost Per Click is calculated through another equation:

Cost Per Click = Ad Rank of the Advertiser Below / Quality Score + £0.01

These calculations ensure that the ranking and cost of the advertisements don’t rest on the maximum payment alone.

Once you’ve joined the advertising program of your chosen platform, setting up a PPC ad will generally involve creating ads to target customers. You’ll need to select your maximum cost, after which your ad will enter the auction which determines the order the adverts are displayed in.

What are the benefits of using pay per click?

Targeted marketing

With PPC, you can advertise directly to people who are already interested in your products or services. Plus, you can narrow down to the groups you want to target. For example, since 46% of all Google Searches are for local information, you might want your ads to be seen specifically by consumers in your local area. All kinds of targeted marketing are possible with PPC.

Advertising within a budget

Have a set budget? No worries. Although money does need to be put aside for PPC campaigns, they provide a higher level of financial control than other advertising media. This means you can plan your budget in detail, especially if you’re working alongside an experienced pay per click management team. If done right, the return on your PPC will easily cover any expenses – and bring you a nice profit.

Fast results

PPC puts your products in front of the people who need them. When consumers search for a product or service, sponsored ads are the first results they see. This gives your business a lot of attention in record time, letting you focus on actually running your business.

Potential for scaling

PPC gives you unprecedented access to insights about your advertising campaigns. Which ads are working? Which demographics should you be targeting? You can then cut campaigns that don’t convert, saving money for ads that really drive sales. You have the potential to go further into niche markets or broaden your horizons with this wealth of information.

Integrating PPC into your marketing strategy

The question ‘how does pay per click work?’ is a double-edged issue, because, like any advertising tool, PPC needs to be looked at in context. Customers might click through to your link, but if the website is confusing or you have no online presence, they will likely exit quickly without purchasing anything. This is why your PPC campaign needs to be part of a wider strategy.

Organic content – including social media posts and SEO blogs – complements PPC perfectly, because it builds your brand’s presence and reputation. That way, when consumers click on your ad, they know your brand is trustworthy and reputable.  Similarly, having a presentable and easy-to-navigate website is vital, especially as the user experience of your landing page can impact the pricing of your advertisement.

Make PPC work for you

How does pay per click work? The answer – it works when you have knowledge of your target audience, a clear understanding of the algorithm, and operate it in conjunction with a great marketing campaign.

Ultimately, knowledge is key to a successful PPC campaign. That’s why pay per click managers can be game-changing. PPC is a subject that takes years to master, and due to fluctuations in the algorithm, is constantly updating. It can be easy for your hard-earned money to go down the drain with a poorly thought-out PPC ad.

At Bing Digital, we take the confusion, hassle and chance out of PPC marketing, so you can focus on your business. Our Google-certified PPC campaign managers can help you save time and money by testing and optimising your PPC ads, tailoring your campaigns to your target customers, and finding the right advertising platforms for you.

Want to learn more? Get in touch with our pay per click management team today.