Setting Your PPC Budget – OR NOT

One of the most common pay per click (PPC) misconceptions I come into contact with is the budget capping vs cost per acquisition (CPA) approach to bidding strategy.

Can PPC seem scary if you don’t cap spend at a particular amount?

Of course it can. But if you manage the bidding process correctly (or have a decent PPC agency to do this for you), spend can be as great or as little as the business you convert.

Let’s break this down.

When you allocate a low PPC budget to a campaign, Google will either show your ad sporadically for short periods throughout the day, or use the entire days advertising budget in the morning. As most online shoppers tend to browse before committing to a purchase, this approach is unlikely to improve your conversion rate as when prospects come to buy, lack of budget could mean that you’ve dropped off the edge of the ‘Google’ Earth (figuratively speaking).

earth, spaceman

A much better way to approach your PPC strategy is to focus on measuring your advertising efforts based on the business you acquire and the cost of acquisition. YOU CAN’T LOSE!

Ask yourself; “how much am I willing to spend per customer/client?”

Every business and/or marketing department should invest in regular research and analysis to determine the lifetime value of each of their customers. From this, one can determine the maximum CPA (or maximum amount we can afford to spend to win a new customer) to ensure all marketing efforts are profitable.

It’s amazing how many companies don’t have this information to hand!

Once you have calculated your CPA you should set your monthly PPC budget to suit the volume of enquiries/sales you expect to gain. It’s really quite simple.

Approaching your PPC budget setting strategy in AdWords

Now we have the CPA, we can further research the keywords in our chosen Ad Group.

Using the Keyword Planner tool in Google AdWords (which combines the functionality of Keyword Tool and Traffic Estimator) you can find new keyword and ad group ideas, get performance estimates for them, and find the bid and budget to suit you.

If estimated spend based on your existing keyword list is higher than expected, you may have to delete some keywords from the group.

e-card ppc

If your company is bidding on too many non-specific keywords, this can result in rapid budget consumption and low conversion rates.

As soon as an account goes live, very generic keyword phrases can generate high numbers of impressions that don’t result in clicks. This will immediately have an adverse effect on the click through rate (CTR) of your entire account – an element that will be detrimental to your Google quality score (we will come on to this). It is therefore essential that any phrases with high numbers of impressions and a CTR of less than 1% are deleted as soon as possible.

NB: once the campaign is live, you should be closely reviewing and/or deleting any phrases with low click through and conversion rates on an ongoing basis.

Once we have our definitive (and affordable) keyword list, we can focus on refining our AdWord bidding technique to reduce the relevance of budget in favour of conversion rates and CPCs.

Time to add conversion tracking.

Once a customer completes an online sale or registration, they will typically land on a thank you page.

We will need to add a tracking code (generated by AdWords) to this page which will feed data back to the PPC account so we can identify best performing keywords and the corresponding conversion rates.

Conversion tracking will also enable us to optimise conversions through testing of keywords, landing pages and search v display testing.

Now keep your eyes on the prize! Your account needs to be nurtured…

keep your eyes on the prize

It is essential that you closely manage your new PPC account to optimise your bidding strategy and ensure you are working profitably. Here are some great free Google Tutorials that go into more detail on how to manage your bids.

It is also important to review your account to continuously improve your Google quality score. A good quality score is determined by the relevancy of your keywords to landing page, and the overall quality of ad copy (with close consideration given to historical and current click through rates).

A good quality score will result in a higher SERP ranking and a lower cost per click – both of which contribute towards the reduction of your CPA. To translate…your boss will love you.

Hopefully this post has got you thinking about PPC a little differently and introduced new ideas and considerations to ensure you maximise your paid advertising efforts.

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One thought on “Setting Your PPC Budget – OR NOT

  1. I’ve spoken with a lot of PPC companies, but the most important thing that you can actually do to your marketing campaign is landing pages. Most companies sell you 1 single thing such as web design, or just Google Adwords, or just popups, or just retargeting etc. This is completely ludicrous because while 1 thing may make a difference in a stable marketing campaign, there is no single element that is a make or break element in online marketing, you need the entire package, and then hone/optimize from there. My business revenues increased by over 60% in two months once I picked a good agency that did more than just PPC, but also did my landing pages, retargeting, banner ads, etc. In fact, I’ve got Simon’s phone number right here, you can talk to him too. Just give him a call at 256-398-3835.

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