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James Challis

Setting The Right PPC Budget For Your Business

17th Apr 2014 Paid Search | 3 Comments


PPC Budget - Light Bulb on BlackboardYou may be aware of the growing need to allocate some of your marketing budget for a Pay per Click (PPC) campaign, but with every industry and business being unique, do you know how much to allocate for your campaign?

If you can set the right PPC budget, you can deliver genuine value to your business and scale the campaign to help your company to grow.

Commercial Aims & Goals

The first place to start off your budget planning is to truly understand what you want from the advertising campaign. Using different types of keywords effectively can allow a business to target users in a different stage of the buying cycle such as researching a product or looking to buy. This is important to know if you are trying to set goals such as encourage more sales, increase profitability or establish brand authority.

Goal setting is crucial and is sometimes more difficult than it seems. For example, a ship building company may ultimately want to increase sales, however the PPC campaign should look at trying to achieve an increase in product brochure downloads, phone calls and direct contact rather than completed orders as it is unlikely most customers will purchase such a premium product purely because of a PPC advert. The key is working out how valuable each conversion is to your business.

For e-commerce companies, the goal needs to be highly specific to achieve the maximum R.O.I. from a PPC campaign. Specific goals such as increasing the number of orders, improving the average order value per customer or to encourage repeat orders from existing customers. The company may want to increase profitability, but it would be difficult to create an accurate budget based purely on this aim.

Using the traditional SMART (Specific, Measurable, Achievable, Realistic and Timely) goal can provide a great framework to work out an initial budget for a PPC campaign.

Cost Analysis

Once your goal has been set, you’ve got to work out what you can afford to spend on the campaign. An optimised campaign should produce a conversion rate anywhere between 1-5% dependent on industry; plan for the best and worst case scenarios using a spreadsheet. Typically premium industries tend to have a lower conversion rate. Try to calculate how much you would be willing to pay for a sale or customer based on accurate cost analysis.

Cost Benefit Analysis Concept With Target Pin Marker

The campaign statistics for online advertising may be more detailed and accurate compared to offline methods of advertising, but it’s only useful if you track the right data and know how to use it effectively.

Cost analysis will be much more difficult to undertake if you are unable to work out the average life time value per customer. It is therefore necessary to work out as accurately as possible how much each customer will spend on your products or services. If the products on a website vary in price and have very different profit margins, it will be important to group products based on this criteria.

To work out the costs of a new campaign, this can be achieved using Google Keyword Planner together with trialing a few priority keywords to get an average Cost per Click (CPC) to use in cost analysis. It would also be helpful to try and compare your previous marketing campaigns with your forecasted returns from a PPC campaign to help you to decide whether you are targeting cost effective keywords.

Timescale & Scalability

Using your worst case cost analysis scenario, have you got the budget to sustain poor performing results for the short term? There are so many ways to optimise a PPC campaign, but if you run out of money too soon, you may not be able to implement the changes to see if PPC could deliver growth to your business. If you are able to, plan ahead and budget for an amount that you can afford to spend over a period of at least 6 months so you have enough time to rescue a failing campaign. Once you have got a profitable campaign, the only things that hold you back from growing the campaigns are search volume, available capacity and available finance. It’s also worth taking into account the length of the delay in receiving money from your customers, especially for B2B customers as this may affect how quickly you can grow a PPC campaign.

Target Location

When you discover that your campaigns can be set to target the world at the touch of a button it’s very easy to get carried away and choose to target everybody. Your business may be able to deliver goods and services to London, New York and Sydney, but is this really going to provide the greatest return? Unless your product is very niche and needs a worldwide audience, you should always begin a campaign in a single country and scale up once successful.

Directional Mileage Sign For World Cities

Reporting, Analysis & Cost Reduction

The most important factor in reporting is ensuring you have accurate conversion goals to ensure that your budget is being spent on the right keywords. If the goals aren’t reporting accurately, you will be unable to review the campaigns and could make costly mistakes.

By focusing your budget on the keywords that are delivering a solid return on investment, you are able to scale your campaigns with confidence. Review and remove the keywords that are costing you money but not contributing towards your goals and check that your keyword bids are delivering enough traffic to ensure that your campaign is using your budget to the maximum every day. If it’s not you may need to target more relevant keywords, a wider audience or increase your bids on keywords that are achieving your goals. Also be sure to identify the keywords, locations and landing pages that convert well and evaluate if they could be improved to perform even better.

For more information check out our PPC services, or Contact Us today with any questions you may have – we’d love to hear from you.

Image Credits:

Light Bulb And Budgeting via BigStock

Cost Benefit Analysis Concept via BigStock

Directional Mileage Sign For World Cities via BigStock

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About the author

James Challis

James Challis has experience in Digital Marketing for the Construction, E-Retail and Event Industries backed up by a degree in Business and Marketing. James provides Digital Marketing expertise underpinned by traditional marketing principles.

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