People who click on pay-per-click (PPC) ads on Google are 50% more likely to make a purchase than users who visit the same site through organic results. Wouldn’t you like to give your business that kind of advantage? PPC advertising can help you drive traffic, increase revenue, and improve brand awareness. Figuring out how to budget for a PPC campaign can seem challenging, though. Find out how to develop your PPC budget and get the most value from your advertising investment.
Why Use a Google PPC Campaign?
Google is one of the biggest advertising platforms in the world. Google PPC ads give your business access to millions of people every day. SEO will help you rank higher on Google’s search engine results page, but to rank at the very top you need PPC.
How Does PPC Work?
With Google Ads, you bid on keywords. Google uses an algorithm in combination with your bid amount and Quality Score to determine who is at the top of their results when someone searches for those key phrases. Your company pays every time someone clicks on your ad.
Benefits of PPC Advertising
A PPC advertising campaign gives your business advantages you don’t get from other forms of marketing. PPC gives you quick entry. In contrast to SEO, which can take months to start affecting your results, PPC can give you better positioning and traffic within minutes. PPC in combination with Google Analytics gives you measurable and trackable data. You have access to details like impressions, clicks, and conversions. You can clearly see what you spent and how it performed based on your goals. Faster access to data lets you make informed decisions more quickly. You can see what you should change or improve on your site. Google PPC can be a significant investment. Setting your goals and analyzing your existing advertising data will help you create a realistic budget.
Set Your Business Goals for PPC Advertising
Before you can establish a PPC advertising budget, you need to define your goals for the ad campaign. You’ll get the most benefit from goals that follow the SMART framework: Specific, Measurable, Achievable, Relevant, and Time-bound. Vague or unattainable goals won’t get you the results you want. A company’s goals for online paid advertising often fall into one of three categories:
- Lead generation or customer acquisition based on ROI
- Growth of absolute lead generation or customer acquisition
- Brand awareness
Generating leads and acquiring customers with a focus on ROI means first setting a target for leads or new customers. You’ll also define the maximum advertising spend per customer. With absolute lead generation or customer acquisition, you’ll define the number of new customers you want within a certain time frame. With this type of goal, you want to meet your target number of new customers with a specific set of ad budget allocation. Finally, brand awareness wants to show the company’s website to a certain number of potential customers.
Determine How Much Traffic You Need to Meet Your Goals
After you establish your goal and a timeline, you need to define how much traffic you need to reach the goal within the timeline. Data from your analytics platform can help you make more educated estimations of the number of conversions you’ll need.
What Data to Use
Data from previous PPC campaigns is the ideal place to start. If you’re starting PPC advertising for the first time or you have a new strategy that you expect will have a different conversion rate than prior campaigns, you can use your website’s overall conversion rate to help you estimate the percentage of people who convert. Keep in mind that paid traffic will probably represent people at a different stage of the buyer’s journey than organic or direct traffic.
Calculating Traffic Volume
The traffic you need to meet your goal is the total number of customers you want divided by your conversion rate. For example, imagine you want 200 new customers. Visitors to your site from paid advertising convert 2.25% of the time. The traffic required to meet your goal is 200/.0225 or 8,889. Using a range of conversion rates will help you plan more accurately. If your conversion rate is 2.25%, a good range would be 2% to 2.5%. With the lower conversion rate, you would need 200/.02 or 10,000 site visitors. The higher conversion rate would give you 200/.025 or 8,000. To reach your target, you would need to drive between 8,000 and 10,000 visitors.
Research the Likely Cost-per-Click
The best place to start researching how much you’ll probably need to pay for each lead is data from previous PPC advertising. The cost-per-click (CPC) is always changing. However, your past numbers will still give you a good general idea of what you’ll need to pay. If you’re new to PPC or you have new goals that differ from your previous spending, you can use Google’s Keyword Planner. The Keyword Planner gives you estimates for search volume and cost. It doesn’t account for other factors like Quality Score that affect your actual cost. However, the Keyword Planner can be a good place to start if you’re new to PPC and want to understand the competition around certain keywords.
Calculate Your PPC Budget
You can calculate your PPC advertising budget by using your traffic and CPC estimate ranges. Your budget is the required traffic multiplied by the average CPC. Using the previous example and a CPC range of $0.40 to $0.85, with the lower conversion rate you would need to spend 10,000 visitors x $0.85 average CPC or $8,500. With the higher conversion rate, you could set your advertising budget at 8,000 visitors x $0.40 average CPC or $3,200.
Your Return on Ad Spend
You can determine your return on ad spend (ROAS) if you know your customers’ average purchase value. First, you need to calculate the expected revenue if your PPC campaign meets its goal. The expected revenue is the average purchase value x new customer goal. For example, if your average purchase value is $250, your expected revenue is $250 x 200 or $50,000. Your ROAS is (revenue – ad spend)/ad spend. Continuing the example, the lowest ROAS would be ($50,000 – $8,500/$8,500 or 4.88. The highest ROAS would be ($50,000 – $3,200)/$3,200 or 14.62. This means that at the low end, for every dollar you spend on advertising you get $4.88 in revenue. At the higher end, you get $14.60 in revenue for every dollar of advertising. Now, we’re not diving into actual profit per customer in this blog, which is what you’d really want to calculate your ROI’s correctly. This post is more about giving you the basics in general.
Maximizing Your PPC Budget
To get the most from your PPC budget, you need a Google marketing expert. Splash Factory is dedicated to helping you get the most from your PPC advertising. We start by learning about your business strategy and goals. Then we profile your ideal customer so we can target the best keywords. You need to use the keywords that your highest-value customers are searching for. You can then provide them with the products or services they want, which benefits your clients and grows your business. Contact us to find out how we can help you meet your business goals through PPC advertising.