You have to spend cash to make money in pay-per-click marketing, like in many other aspects of life. But how do you determine how much to spend? Your monthly and annual budgets are critical components of your PPC strategy, so whether you’re new to PPC or have been doing it for years, it’s worth pausing to assess whether you’re getting the most out of your money. Because advertising charges only accumulate once a prospect clicks on your ad, a PPC budgeting determines how much money is committed to online traffic acquisition activities.Moreover, your lead needs are the most crucial factor to consider while budgeting. You’ll have to sit down and determine some of your leads’ attributes, such as geographic area, visitor frequency, purchasing cycle, lead quality, and target cost per lead. If you are not sure of what your lead looks like, begin by answering some questions:
- How can I determine the worth of a “lead”?
- What am I able to afford it?
- How many leads do I require through pay-per-click?
- What is my present conversion rate?
Here, let’s take a closer look at what is PPC, how it works, and what data you’ll need in order to make informed PPC budgeting decisions.
What Exactly is PPC?
Pay-per-click (PPC) is an online advertising technique in which an advertiser compensates a publisher for each “click” on an advertisement link. The cost-per-click (CPC) model is another name for PPC. Search engines (such as Google) and social media networks (such as Facebook) are the most common providers of the pay-per-click model. The most prominent PPC advertising platforms are Google Ads, Facebook Ads, and Twitter Ads.
How Does it Work?
Advertisers cannot simply spend more to ensure that their advertising appears more prominently than their competitor’s ads alongside the results on a search engine (often known as a Search Engine Results Page)(. Conversely, Google and other leading search engines employ a fully automated method known as the Ad Auction to decide the relevancy and legitimacy of adverts that appear on their SERPs.
Why is PPC Important?
The value of PPC is determined by a company’s ability to analyse data effectively, make changes to ad campaigns, wait for new data, and then assess the success of their changes. This type of advertising is extremely data-rich, providing marketers with extremely granular data and ad management.Whether you’re a small business or a large company, setting a budget for each PPC campaign is critical. Why? Because you won’t be able to assess your cost-per-conversion without a defined PPC budgeting, you’ll spend considerably more than you should.
4 Ways on How to Determine Your Pay-Per-Click Budget
Even while there isn’t a magic amount that will work for every firm, you’ll want to avoid going into it blind and blowing your entire budget. Let’s take a look at a four-step structure that might assist you to figure out how much PPC to spend for your company.
Create a Profit Target
If your campaign has a measurable impact, go back to your ideal budget by first determining the answers to the following essential business questions: gross margin percentage, average order value, and cost per acquisition. Let’s say your organisation wants to see £5,000 in profit from the Google Ads program in the first month. You know your product’s average order value is £450 per transaction, and the gross margin is 55%. While executing the ad campaign, you should spend £7,375 per month for click fees and never go over a £147.50 cost per acquisition.
Examine Previous Results
If you’re launching a sponsored search campaign, utilise this option to see if your budget is big enough to cover every keyword topic you’re bidding on. Under the ‘competition’ metrics section of columns to show in Google Ads, look for the measure “impression share lost due to budget.” Because of your budget, your company’s advertising is not appearing as frequently as it may be when this metric is above 0%.
Determine the Most Effective Keywords for Your Marketing Goals
Before setting a suitable PPC budget for a Search campaign, you must first establish the search phrases that potential buyers use while searching for your product or service. While this is simple for businesses like e-commerce stores, it becomes more difficult if your product is an answer to a niche need. In such instances, you must figure out how to track the success of your marketing dollars to the best of your ability. Focusing on keywords with imminent buying intent should be your initial approach. Keywords with a high intent will almost certainly have a greater conversion and click-through rate.
Make Use of the Keyword Planner Report
The Google Keyword Planner is an excellent tool for narrowing down your target audience and budget. It has a number of features, including the ability to find new keywords, combine keyword lists, anticipate click and cost performance, and display search traffic data and trends.You’ll get a list or report for each option, which you can filter based on various factors like average monthly searches, ad impression share, and suggested bids based on the CPC that other advertisers are spending for keywords with the same setting you’ve chosen.Tools like Ahrefs or Semrush, on the other hand, are ideal one-stop shops for all of your SEO and PPC needs. Their keyword tools give you access to up-to-date keyword information, insights, and filters.
Do a Calculation
Many PPC professionals utilise a sequence formula to determine an appropriate advertising budget. As a general rule, multiply the average monthly searches of all relevant terms (as determined by your Keyword Planner report) by a specified search impression share (often 50 to 70 per cent). This will tell you the total number of impressions your advertising might get for all of the keywords. After you’ve figured out how many impressions you’ll get, you’ll need to figure out how many clicks you’ll get. You want to increase the impressions by the expected CTR in this case. It’s time to determine your PPC budgeting now that you know your prospective click volume. Multiply the probable volume of clicks by the average CPC from the Keyword Planner report to reach this figure.
Calculate Your Profit Potential
Most marketers will use return on ad spend (ROAS) as a proxy for measuring digital advertising performance. Essentially, determining how to calculate goal ROAS is not as difficult as it may appear. It’s the proportion of an ad campaign’s total revenue to the amount of money spent on it. Here’s where things get a bit tricky: ad campaign income is normally only calculated using the price of a customer’s first purchase. For subscription-based SaaS firms, assessing ROAS in conjunction with the customer’s lifetime value (LTV) is critical for determining profitability.
What Role Does Campaign Hierarchy in a PPC Budget Play?
Once the overall monthly budget has been decided, the campaign level is where it is allocated inside the ad platform. The ad groups housed within that campaign, which comprise your keyword themes, affect the campaign hierarchy, which is established by performance goals from an ROI aspect (i.e., the intent behind the search query).Lower-funnel keyword themes are usually given the most cash because they are more likely to lead to a successful action on your website. This is why, as part of your budget calculations, you should investigate suitable keywords and finalise the campaign structure by grouping tightly themed phrases into a successful campaign hierarchy.
Things to Keep in Mind When Doing PPC Budgeting
While having an advertising budget is essential, putting one together may be a daunting undertaking. Here are three suggestions to keep in mind while you work on your budget.
Begin With Your Objectives
It’s critical to identify what you’re spending for before we go into the dollars and cents of how much you should spend. Setting actionable, quantitative goals for your PPC spend, as well as a deadline, is essential. It’s likely that a stated objective feels ambiguous or unreachable to you. To begin started, use the SMART framework (Specific, Measurable, Achievable, Relevant, Time-bound).Setting PPC budgeting goals targets can be done in a variety of methods. Absolute lead generation or customer acquisition growth, ROI-focused lead generation, and brand recognition are the most prevalent objectives.
Determine the Needs for Traffic Generation
If you have a definite, quantitative target with a timetable linked to it, the next step of the PPC budgeting process is the traffic generation requirements. How much traffic do you need to drive to achieve your goal within the time frame you’ve set?Use any past data from your analytics platform to educate your estimations instead of guessing. That’s the best place to start if you have a full business cycle’s worth of previous PPC conversion numbers.
Research for Cost Estimates of CPC
Get a sense of how much you’ll have to pay for each click to get the traffic you need. When evaluating your CPC, employ a range, much like when predicting your conversion rate. Your current PPC efforts and historical data are both excellent sources of information for CPC calculations.Log into your Google Ads account, go to the “Tools” tab in the top menu, and then click “Keyword Planner.” Keep in mind that this tool estimates search volume and costs. Many factors, such as Quality Score, will influence your Actual CPCs. Even so, if you’re beginning from scratch and attempting to figure out how competitive certain phrases are, this is an excellent place to start.
Select the Most Beneficial Budget Type
Companies can choose from a variety of choices when it comes to creating paid search budgets. Marketers and advertisers commonly use the following strategies:
Prior-Year-Based Budgeting
The budget is calculated on a percentage of sales from the previous year or the average sales from the previous few years.
Objective and Task-Based Budget
The PPC budget is determined by the marketing or advertising activities that are planned.
Percentage of Total Sales Budget
The advertising budget is determined by industry or competitive criteria.When all is done, marketers frequently combine several tactics to come at a final budget. This can often result in a more accurate estimate of the costs required to reach your PPC objectives. The advertising platform itself is another crucial thing to consider when choosing a budget type. Naturally, different platforms are better for different businesses, and identifying which is ideal for reaching your target audience can be challenging.Consider splitting your PPC spending evenly between the two platforms if you’re just getting started and considering Facebook vs Google advertising, for example. This will allow you to obtain a better understanding of the features and functionality available on both platforms and evaluate which one provides the most value.
Take Into Account Forecasting
Forecasting in PPC relates to how you use data to generate predictions. Essentially, the purpose of PPC forecasting is to gather as much high-quality data as possible in order to create an educated guess about the impact different situations might have on your PPC campaigns.For example, the Cost Per Click (CPC) is a sort of data that is frequently included in forecasting reports. Consider this scenario: If you sell a product with a low entry barrier yet a low price point, the CPC may frequently be forecasted based on factors such as new market players entering the market or present competitors bidding with large budgets.
Be Adaptable
When it comes to PPC budgeting, flexibility and adaptability let you react quickly to market changes, emerging possibilities, and coming challenges. If a particular advertising platform, for example, generates the majority of your revenue, you might allocate more of your budget to that medium. You might potentially increase promotional spending when sales are up or decrease promotional spending when sales are down.
Take Away
Overall, it’s evident how important PPC budgeting is and why it’s something you should start doing right now. Of course, each company’s budget management strategy will be unique. And it will be determined by a number of things, including your personal preferences, overall objectives, and ad expenditure. When done correctly, however, it can result in highly effective PPC ads that generate favourable sales. Just make sure you’re utilising the correct budgeting tools and software to get the job done right from the start.