PPC campaigns can be a powerful way to drive traffic, leads, and sales for your business. But how do you know how much to spend on them without wasting money or missing opportunities? In this article, you'll learn how to determine your PPC campaign budget without overspending, using a simple formula and some best practices.
The first step to setting your PPC campaign budget is to figure out how much you can afford to pay for each click. This depends on your profit margin, your conversion rate, and your target return on ad spend (ROAS). The formula is:
Maximum cost per click = (profit margin x conversion rate x ROAS) / 100
For example, if you sell a product that costs $100, has a 50% profit margin, a 5% conversion rate, and a target ROAS of 400%, your maximum cost per click is:
Maximum cost per click = (50 x 5 x 400) / 100
Maximum cost per click = $10
This means you can bid up to $10 for each click and still achieve your desired ROAS.
Having clarity on goals is key. Define whether you want to drive traffic, generate leads, boost sales, or enhance brand awareness. Also understand all the bidding options well like Manual CPC, Enhanced CPC, Target CPA, and Target ROAS for strategic control. Do good keyword research using tools like Google Keyword Planner to identify what your audience is searching for. Regularly monitor and adjust campaigns for optimal performance, keeping in mind that flexibility, precision, and a touch of automation are vital for successful PPC on a budget.
The determination of budget is very subjective. First of all we have to understand that every advertiser has different pocket and based on that every business decide their spends. Though based on the decided budget we can estimate number of clicks, impressions and conversions that are too based on the CPC amount.
The next step is to estimate how many clicks and conversions you can expect from your PPC campaign. This depends on your keyword selection, your ad quality, and your market size. You can use tools like Google Keyword Planner, Google Analytics, or SEMrush to get an idea of the search volume, competition, and average cost per click for your keywords. Then, you can multiply the search volume by your expected click-through rate (CTR) and conversion rate to get your monthly clicks and conversions.
For example, if you target a keyword that has 10,000 monthly searches, a 2% CTR, and a 5% conversion rate, your monthly clicks and conversions are:
Monthly clicks = 10,000 x 0.02
Monthly clicks = 200
Monthly conversions = 200 x 0.05
Monthly conversions = 10
Once you've defined your business goals it's time to understand your customer lifetime value (CLV). Then, analyze historical data from previous campaigns to gauge average cost-per-click (CPC) and conversion rates. Also, check the industry average CPC and your competitors' spend. And then use A/B testing to optimize your ads and landing pages, improving conversion rates. Finally, review campaign performance regularly to adjust your budget, ensuring it aligns with your ROI targets. Additionally you can also use automated bidding strategies to optimize spend efficiency.
The final step is to set your monthly budget based on your maximum cost per click and your monthly clicks. You can simply multiply these two numbers to get your monthly budget.
For example, if your maximum cost per click is $10 and your monthly clicks are 200, your monthly budget is:
Monthly budget = $10 x 200
Monthly budget = $2,000
However, this is not a fixed number. You should monitor your campaign performance regularly and adjust your budget as needed. You may want to increase your budget if you see high ROI, low CPC, or high demand. You may want to decrease your budget if you see low ROI, high CPC, or low demand. You may also want to test different keywords, ad copies, landing pages, and bid strategies to optimize your campaign results.
By following these steps, you can determine your PPC campaign budget without overspending and achieve your marketing goals.
All said and done, everything finally boils down to "How much can the client spend", atleast when you start, later when you start showing results, you might still get the better budgets. Only after the budgets are defined, can you set the targets and start optimizing further
You should also create experimental ads to target different personas and try to optimise your CPC with experimental data that you get, when working in a startup you may have limited budget so you will have to know which persona gives you more ROI and with the optimum CPC
Begin your campaign by allocating the budget according to the estimated costs. Creating a cost estimate is straightforward if you have past keyword data. The formula is simple: if a campaign has spent 100 and received 50 clicks, you can calculate the average CPC. Utilize this CPC to estimate the number of clicks you'll get based on your budget. As your campaign starts accumulating clicks, adjust the budget based on the average daily spend and the total budget, always incorporating a 1-2% buffer.
To determine your PPC campaign budget without overspending, start by setting clear goals and understanding your target audience. Calculate your maximum cost per click (CPC) and estimate the daily clicks needed. Monitor your campaign regularly, adjust bids based on performance, and use budget controls in the PPC platform. Test with a smaller budget initially, analyze results, and gradually scale up if the campaign is effective. Regularly review and optimize to ensure efficient spending.