One of the first questions business owners must ask themselves when considering a new digital marketing campaign is how much money they have to allocate towards the campaign. Solidifying the answer to this question is so critical that it will determine whether or not it’s a wise investment to continue with a pay per click (PPC) advertising campaign at all.
3 Steps to Planning Your PPC Ad Budget
A successful PPC advertising campaign is data-driven, and with all of the data available at your fingertips today, it’s easier than ever to find the answers you need to make informed budgeting decisions. There are several components to your research:
- Keyword Research – You will want to conduct research to identify what keywords perform well for your industry and location. Search volume trends (how many people conduct a search using the keyword) will be important in determining how popular different keywords are and by extension, how many leads you might drive using those keywords. Keyword planning tools can also generate ideas for new keywords that you may not have considered.
- Cost Per Click (CPC) Research – It will be important to determine how much you will spend every time a prospect clicks on your ad for a particular keyword. Key data include competition (the number of advertisers bidding on the keyword relative to other keywords) and top of page bid price – high and low range (how much advertisers have historically spent bidding on the keyword to land at the top of search results). There are a number of other factors that will influence CPC, including your ad copy and landing page, but you can get a fairly accurate estimate of what your costs will be by looking at competition and top of page bid price.
- In-House Research – To estimate your target ad spend, there are a few key data points you will need to determine using your business’s internal data and analytics. First, you’ll need to know the value of each potential lead. For example, if you sell products, this may be the average value of an order, or if you sell services, this could be the average value of a project or job. Second, you’ll need to look at your analytics data to determine your conversion rates. Knowing the percentage of visitors to your website who end up converting into customers will be important in determining how much traffic your campaign will need to drive to your website in order to get one purchase. You will use these key data points in addition to cost per click to assess the profitability of your campaign.
Targeting is critical to most campaigns, as it helps you to narrow your ad spend to the people who are most likely to become leads or customers, so your dollars are being spent where they’ll have the most ROI. There are a number of ways you can pare down your audience with targeting, but we will touch on a few of the major ones here:
- Geographic Targeting – Limiting the geographical area for which your ads are shown is one of the most effective types of targeting, particularly for local businesses. You can target by country, by area within a country (including regions, cities, or zip codes), or by radius around a particular address. For local businesses, geographic targeting helps limit ad spend to only the people who could reasonably become customers.
- Demographic Targeting – Limit your ad spend to your target audience with demographic targeting. This is a useful option for businesses who know which people are most likely to become customers. Demographic targeting options include factors like age, gender, parental status and household income.
- Temporal Targeting – You can determine what times of the year, what times of the day, or which days of the week your ads should run. This can be particularly helpful for seasonal businesses or businesses that only sell to customers in particular locations, as it allows you to turn off your ads (and conserve ad spend) during the time of year when your business is inactive or the time of day when people are unlikely to be online searching for your products or services. It can also be helpful for certain ad types, such as call extensions, as you can choose to run your ads only during your hours of operation so you never miss a lead.
- Remarketing – Remarketing allows you to target people who have already interacted with your website, ads, or app. This tactic is effective because it allows you to not only target people who have already shown some interest in your products or services, but it also allows you to be specific in your targeting; for example, you can show your ads to people who spent time on a particular page, or to people who added something to their cart but didn’t complete their purchase. Remarketing is also more cost-effective than other strategies because you aren’t competing with other businesses for keyword placement in search results. This can be particularly helpful for small businesses with limited ad budgets.
An effective advertising campaign will never be set it and forget it, so be sure to set aside time to regularly monitor your campaign and make adjustments as needed. Monitoring helps you identify which keywords are strong performers and which you may be spending too much money on for too little return. Key performance indicators to monitor to inform your ad spend will include your cost per click, click through rate, conversions, position, and how quickly you reach your daily budget each day.
After conducting your research, you will know whether a PPC campaign will be profitable for your business and if so, you should have a good sense of your ideal ad budget. By implementing targeting, you will be able to make the most of your marketing investment by only showing your ads to those people who are most likely to become customers at the times when they are most likely to convert. Finally, through monitoring, you will continually cut spending on keywords that aren’t working for your business and redirect your marketing dollars to the avenues that are generating the most profit. By following these 3 key steps, you will be on track to maximize the ROI of your PPC ad campaign.
If you’re ready to get started with an estimate of your ideal ad budget, try using our PPC budget calculator below. To use the calculator, you will need to have handy a few key data points from your research: average CPC of your keywords, your website conversion rate, and your monthly lead capacity.
Use Our PPC Budget Calculator to Determine How Much to Spend on Your Ad Campaign
Courtney Turrin is VP of Data Science at Xponent21. We engineer digital experiences that delight visitors, attract new leads, increase conversions, and reduce operational overhead. To learn more about Xponent21 and our digital marketing services, get in touch with us today.
Pingback: Conversion Optimization Boosts Profit | Case Study | Xponent21