Budgeting Your Pay-Per-Click (PPC) Advertising
If you’re new to PPC advertising then you may be finding it difficult to determine the size of your budget. There are no easy answers for setting up an initial budget; however, there are certain things you should consider before starting.
The most important factors your will want to think about are:
- Account Size
- Industry Cost Per Click (CPC)
- Conversion Rate
- Conversion Goal
Let’s break these down a bit further…
The size of your account is one of the biggest determining factors when it comes to setting your budget. How many campaigns, ad groups and keywords will there be in your account? The bigger the account the more you will likely need to spend to keep your ads active throughout the day. The other factor is the geographic location(s) you’re targeting; if the areas you’re targeting have a high population then your budget will need to be higher.
To get a rough idea of the estimated traffic for a particular geographic location you can use the free Google Traffic Estimator.
The average cost per click can vary depending on the industry or niche you’re targeting. Some keywords may cost as little as a few pennies but more competitive keywords can range anywhere from $5-$25. The more expensive your advertising space is, the higher your budget will need to be to stay competitive.
To get a rough idea of the average cost per click in your industry, use the free Google Keyword Tool, search for a related keyword and locate the “Estimated Avg CPC” column.
When you’re selling a physical product, the conversion rate is likely to be lower than when you’re giving away a white paper in exchange for personal information. It is also unlikely a brand new account is going to get anything above 5% without at least a few months of optimization. Of course there are exceptions but the general rule is to expect a lower conversion rate when starting out.
A conversion can be anything from a viewed page to a sale. In PPC, a conversion tracking script is typically placed on a thank you page where the visitor will end up after a desired action. This allows us to track the conversions.
What are your expectations? How many leads or sales are you looking to achieve?
This is where it helps to have an idea of the average estimated cost per click and the estimated conversion rate. By having these numbers you can apply some basic math and get an idea of what is achievable with the budget you have established.
For example, let’s say the average cost per click is $3, and the average estimated conversion rate is 2%. Using these numbers the cost per conversion will be $150. If you are looking to achieve 20 leads for the month then your estimated monthly budget would need to come in around $3,000. Go ahead and use the formula above to get an idea of what your budget will need to be to achieve the desired amount of leads.
Because this is a guideline to determining an estimated PPC budget, it is not 100% dead on. The idea is to set the budget using the data at hand then adjust based on performance.
Keep in mind that if you set your budget to low, it may take much longer to see the results you want. PPC is a data-driven platform meaning that the more data coming in, the quicker certain aspects can be tested and improved. If the data isn’t there then the improvements and ultimately conversion will take much longer to show.
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