What is Pay Per Lead, and How Can My Business Use It?
When you buy something through one of the links on our site, we may earn an affiliate commission.
]In today’s hyper-competitive landscape, finding customers is harder than ever. Not only do you need to find leads, but you need to find qualified leads that are actually interested in your business.
How do you do that?
You can generate a strong lead generation campaign on your own, but some businesses are turning to pay per lead agencies for help. It may cost more up front, but the opportunity to double your revenue (or more) makes up for the cost.
What is Pay Per Lead?
Pay per lead advertising is a form of “performance-based” marketing where the client pays specifically for results that are generated.
This is either a flat rate agreed upon by the marketer and client or a percentage of the converted lead. For example, if a lead generates a sale of $10,000 on a course and you receive 20% of the sale, that’s $2,000 in your pocket.
The cost for this can vary depending on the niche. Some low competition markets can charge a dollar per lead (flat rate), while others can be closer to the $30-$50 range.
And if you happen to be in the home services niche, you can charge almost $500 per qualified lead. It all depends on what niche — and sub-niche — you decide to specialize in.
Why? Because the cost of a home service — roof replacement, foundation repair, bathroom remodel — is worth 10-20x more. In the end, it’s a simple numbers game. The more quality leads you have, the more business you can generate.
The type of agreement that is in place will depend on the customer and the agency. Generally speaking, there are five different payment models.
- By the Result – This is the scenario outlined above. You get paid a flat rate (or percentage) of every lead that is brought in.
- By Ad Spend Percentage – You get paid a portion of the total ad spend. Since the rate is known at the beginning, there’s little incentive for the agency to increase leads.
- By Monthly Retainer – Instead of a percentage, the agency is paid a flat rate every month to manage ad campaigns (start your own business with one of these great advertising agency names). Once again, there’s very little incentive for the agency to develop leads, so it’s not very popular.
- By the Hour – This is probably the least popular payment setup, since it requires the agency to track the hours they spend on the project. Since it changes every month, the cost to client is unknown, as are the results.
- Hybrid Model – A hybrid approach combines two of the above methods. Usually, a retainer contract is implemented, with additional payment for each result. The client knows the upfront cost and understands any additional cost will come with qualified leads.
What Qualifies as a “Lead”?
To be fair, not every person that expreses interest in a business is a good lead. Some are just tire-kickers, only interested in getting a few quotes that they can compare. Others may be genuinely interested but are waiting on a few other dominoes to fall first (i.e. disposable income and available time, to name a few). That doesn’t mean those people won’t ever buy, it just means that they’re not ready to buy now.
In a perfect world, a prospective customer would have gone through a series of actionable steps before the contact info is handed over to the client. That could be signing up for a trial offer, subscribing to a mailing list, or even visiting a landing page. The terms are usually hammered out in the PPL agreement at the beginning.
But no matter which way you slice it, a new lead is valued according to their proximity to a paying event. The more likely they are to buy from a business, the more that lead is valued by the business. Nail that down, and your agency stands to make a lot of money.
Why Should I Use Pay Per Lead?
For agencies looking to add a PPL service offering to their business, it can (surprisingly) be a tough sell. Most clients are wary of paying for leads because it’s not a sure thing. They still have to maintain their part of the bargain and close those leads, but as the agency, you get paid either way.
For that reason, it’s a good idea to enunciate these advantages to the end client:
- They’re Cost-Effective. No more paying for clicks (PPC advertising). The client is only charged for performance metrics that move the needle.
- No Hidden Fees. Unless you’re paying by the hour, the client knows up front what they can expect to pay.
- Increased Brand Recognition. Since many companies aren’t doing paid ads, you have the opportunity to cement your branding, especially if you’re in an urban area.
- Quick Results. Some digital marketing campaigns take months. PPL campaigns can take days or less.
- Identify Ideal Channels. If Google ads don’t work, you can pivot to Facebook. Or Tik-Tok, Twitter, or Reddit. You identify what works best for your client.
- Audience Insight. If you’re curious what type of audience is interested in the business, a PPL campaign will highlight that really quickly.
- Perfect for Competitive Niches. The more competitive a niche is, the more specific your targeting has to be. PPL are laser-focused on results, allowing your client to penetrate deeper into markets.
- Decreased Financial Risk. If a client has been burned in the past by paying for marketing that never worked, PPL is the way to go. You’ll only generate revenue for the client — no long-term social media or SEO campaigns to manage.
How Do I Reduce My PPL?
Whether you plan on using PPL campaigns as a marketer or in your own business, reducing the cost of the leads is crucial. The more money you can save on costs, the more you can plunk into the overall campaign and the more profit you generate.
Rethink Your Keywords
Keyword research is necessary at the beginning, but think of it as an ongoing process. Syphon out the keywords that aren’t performing and replace them with new ones. Once you find those superstar keywords, drive as much of your revenue as you can towards them, while avoiding saturation.
And, as always, A/B test keyword combinations to death in order to find the most precise targeting possible.
PPL is performance driven, so monitoring your performance will be key to keeping you in the black. Sort your metrics by location, date, and device to identify audience habits.
Remember, in the immortal words of Peter Drucker, “What gets measured, gets managed.” That quote may not always be applicable, but for performance marketing, it’s spot-on.
Any marketer that’s been around for a few years has heard of pixel retargeting (even if most of the world thinks it’s creepy).
If you can convince the client to put a pixel on their site for retargeting purposes, it’s a game changer. You can drive cold traffic to a site or objective, then retarget the warm audience later to create a qualified lead. Not only will your metrics go way up, but the client will be much happier with the results as well.
For a marketing agency that is already offering a suite of services, pay per lead marketing is only logical. You provide more value to your clients while also providing a new income source for yourself.
Want to learn step-by-step how I built my Niche Site Empire up to a full-time income?
Yes! I Love to Learn
Learn How I Built My Niche Site Empire to a Full-time Income
- How to Pick the Right Keywords at the START, and avoid the losers
- How to Scale and Outsource 90% of the Work, Allowing Your Empire to GROW Without You
- How to Build a Site That Gets REAL TRAFFIC FROM GOOGLE (every. single. day.)
- Subscribe to the Niche Pursuits Newsletter delivered with value 3X per week
My top recommendations