How much should you spend on an advertising campaign? That’s a common question many businesses and marketers face, and the answer isn’t always apparent. Sometimes, project goals change, and a company needs to adjust its strategy to remain within budget. To avoid overspending on your PPC campaign, consider these 5 factors to stay on your targets.
Pacing Your PPC Advertising Spending
Many small businesses go over their budgeting restrictions because they’re unsure how much an advertising campaign costs. While your company can handle a few missteps, you must practice PPC budget pacing as soon as possible. Through budget pacing, you can more accurately determine and control the spending rate of each campaign.
Creating the optimal budget takes time, and multiple steps, but running through the motions will help you save money on future projects and make you faster at initiating campaigns.
Here are 5 ways how you can determine an optimal PPC budget:
1. Campaign Goals Part 1: Personal + Professional
Each campaign should have an achievable goal. It’s better to think of your campaigns in short-term goals that will lead to long-term achievements. Otherwise, you’ll become overwhelmed or discouraged and may avoid marketing in the future.
Google Ads, the most popular ad platform, separates campaigns into six types:
- App promotion
- Brand reach and awareness
- Product and brand consideration
- Website traffic
- Leads
- Sales
With this, you can create a goal surrounding those campaign types. For example, your company may want to generate more leads or make more immediate sales online. Every goal should include conversion rates, which is how often an ad click leads to a sale.
2. Keywords and the Importance of “Right Place, Right Time”
A campaign’s success relies mainly on the keywords you use. If a PPC ad doesn’t use relevant terms or phrases, no one will find it, or the people who do find it won’t want to buy from you.
Marketing content must be spot on. Ensure that the marketing material is relevant and attracts the right people. If your website is of low quality or doesn’t put your ads in the right location, your conversion rate will be low. Ad platforms assign quality scores for campaigns, and that will impact how many times it’s shown.
3. Campaign Goals Part 2: Profitability and Numbers
As soon as you know your personal and professional goals, you can start addressing how much money you would like to earn from this campaign. To do this, fill in the required data below:
- AOV or Average Order Value
- GMP or Gross Margin Percentage ((Revenue – Cost of Product Sold)/Revenue = Gross)
- CPA or Cost per Acquisition (Set a goal that keeps you profitable)
Example: Let’s say you want to drive $10,000 in profits in the first month. If your AOV is $900 per sale, and GMP is 60%, you would need to have a Google Ads budget of $17,000. Therefore, your CPA cannot exceed $340 to remain on a budget if you make 50 sales.
50 sales * $900 AOV * 60% GMP – $17,000 = $10,000 in profit on month one
You can use this equation yourself to determine your budget for each campaign.
4. How to Determine Monthly Goal Based on Traffic Generation
Creating a practical profitability goal will be difficult without enough traffic. If you place your ads on high-traffic websites, you will need to pay more, affecting your budget. A good ROI is 7% per year, but that doesn’t have to be a benchmark for your small business.
Another way to look at traffic generation is to determine your conversion rate, which should be above 10%. If a website only receives 1000 organic viewers per week, at best, you’ll sell 400 units or more. You won’t be able to meet a 1000 unit goal, for example, with those numbers.
5. Improve on Past Campaigns
Keep track of your past campaigns to reduce overspending habits. Google Ads has a metric called “impression share lost due to budget,” which should ideally be 0%. If it exceeds that amount, you’ll either need to increase your budget or shorten your campaigns.
