Are you spending your PPC advertising budget wisely? How do you know where to focus your spend so that you get the most out it? And, how much should you spend to ensure your ads show more than your competition?
Knowing how much you have to invest in SEM is key. A strong budget spend leads to strong performance and is essential for PPC success. There’s no substitute. Also remember that it’s about which audiences you want to target and the channels you choose to reach them through.
How to Optimize Your PPC Advertising Budget
Common goals for a PPC advertising budget include brand awareness, product and brand consideration, lead generation, sales, and repeat sales, or customer retention. What they all have in common is the desired result: return on investment, or ROI.
There are five considerations for optimal PPC budget planning:
- Lead quality
- Target cost per lead, or CPL
- Buying cycle
- Visitor frequency/bounce rate
- Geographic location
Whether you’re advertising on Facebook, Instagram, LinkedIn, Twitter, Pinterest, or another channel, you need to complete a lot of front-end work before making a spend. But do that work and even a limited PPC budget can potentially reach thousands of people who are looking for exactly what you have to offer.
Yes, budget planning can feel overwhelming, but it’s an essential part of being successful with Google Ads. Here are our five top tips for creating the right PPC advertising budget for your business.
Tip #1: Calculate your lead generation formula
It’s a simple equation that can help you reach your SEM objectives:
- Number of customers = (Revenue/Sales Period)/Average Sale
- Number of leads = Number of customers/conversion rate
- Amount of traffic = Number of leads/conversion rate on traffic
In other words: ROI from ad spend is revenue generated from your PPC campaign minus the cost involved. Other factors that can affect your numbers include whether you use your homepage, internal pages, or a custom landing page to support your efforts.
Tip #2: Location and timing
Of course, it varies by business, but if most of your revenue comes from local customers, it’s a good idea to target a small radius at the start. If and when you’re ready to run a nationwide campaign, starting with a smaller area can still be a good idea, as you can measure the results and profitably scale larger campaigns accordingly. As to timing, once you see the data on when your ads are performing best, it can be a smart budgeting move to begin limiting the timeframe in which your ads are shown.
Tip #3: Choose your keyword strategy
As there are different types of keyboards, think in terms of your lead funnel when choosing which ones to use.
When creating PPC ads you can select broad match, modified broad match, phrase match, or exact match, and each has its advantages and disadvantages depending on your goal.
People who explore their options at the top of the funnel are not yet ready to buy like those at the bottom may be. In the middle are those who are narrowing down their options. Your budget will depend on if you’re targeting one group or all three. So, if you’re doing lead generation, you’ll want more high funnel keywords; ecommerce should include more lower funnel keywords, and so on.
As further explained in Tip #4, you can use Google’s Keyword Planner to find cost-per-click estimates.
Tip #4: Plan your PPC Advertising budget
The goal is to choose a bidding strategy that maximizes profits within your desired budget. Here’s how to assemble the data you need.Decide on a monthly baseline budget that the data tells you is required to be competitive. It can always be adjusted as you gather data from your campaigns post-launch. Too low a budget and good PPC becomes an uphill battle you can’t win. Have a budget reserve to draw from. The finest PPC account design and structure gets you no where if you don’t have the needed monthly ad spend to compete.
Use Keyword Planner to find cost-per-click (CPC) estimates which are the average amounts Google charges you when one of your ads is clicked on. Just input the search terms you want to advertise on into the “product or service” field and the planner returns a list of keyword ideas that correlate with them. The number from the suggested bids column can be used as your CPC estimate.
Remember, you have to spend to show up. Getting a 70% plus impression share means you must pay to play. You want your ads to show up at least seven out of every ten searches, or your competition may clean your click clock. You have to show up to get a click and you have to have a click to get a sale.
Three important caveats:
- Your actual CPC will vary, so be sure to compare your original budget to your actual results.
- When you begin creating ads you’ll want to go beyond Keyword Planner to find the best search terms.
- If you have a higher average CPC in a competitive industry category, you’ll need to budget higher from the start.
Tip #5: Improve Impression Share
If a keyword or phrase isn’t generating the volume you’re looking for, an informative metric known as impression share can help you understand why. “Impression share” is simply the number of impressions you receive divided by the estimated number of impressions you were eligible to receive. It can be improved using several techniques, including increasing your budget. Other strategies include adjusting geo-targeting settings and improving your ad quality. Just know that strong ad spend is the best boost for impressions share. Strong ad spend plus the other nuances mentioned all work together.
ROI vs. ROAS: Which is the Better Metric?
Calculating results is critical to conducting successful PPC marketing campaigns. Today, ROAS, or return on ad spend, is the preferred method for determining profitability of digital channels, but ROI can still help determine whether a campaign is worth the investment you’re making.
PPC metrics to track include clicks, CPC, click-through rate, quality score, impression share, conversion rate, cost per conversion, total conversion value, and ROAS. You can then use this data to assess the effectiveness of a given ad campaign which, in turn, allows you to determine whether to increase, decrease, or discontinue your spend.
The “Right” PPC Advertising Budget
So, how should you budget your PPC advertising? Start with a strategy that focuses on the best-performing ads while constantly reviewing performance to ensure you’re wisely allocating resources. While there’s no one-size-fits-all calculation, allocation that’s based on volume and campaign performance is key.
Atkins Marketing Solutions can help you calculate the best budget for your PPC advertising campaigns using today’s best SEM practices. To learn more, contact us online today or call us at 714.904.4453
Stuart Atkins
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