Join Elizabeth Marsten for an in-depth discussion in this video Setting daily and monthly campaign budgets, part of Advertising Foundations: Pay-Per-Click.
The first rule of selecting a paid search budget of any kind is to make sure that it's one you are comfortable with. If it's going to give you an anxiety attack, followed by obsessive logging in and checking out how much money has been spent, it is too high. The other caveat around PPC is that you cannot assume that you are going to make a million dollars out of the gate. I liken a first walk through PPC to a game of craps. Decide how much money you want to work with. And when it's gone at the end, stop. That's a cold table. Do not visit the ATM and pull out more cash. Assume that this money that you've set aside to try PPC is gone.
And do not assume an immediate return. You may very well find success early on. That's my hope. But too often, I've heard dismayed and frustrated advertisers lament about how PPC just doesn't work for them. Granted, some of them are right. PPC isn't for every industry, but more often than not, when I get to look at their account that they were running, I figure out why it wasn't working for them and it wasn't the search engine's fault. So, unfortunately, we're going to have to do some math here. Because your budget depends entirely on how much you can afford to spend to get one sale. Taking into account things like average order value and cost per click.
If your average sale value is $30 and it costs you, say, $20 for the product and you make a $10 profit per sale, how much of that $10 are you willing to spend to get the $30? This is only something you can determine. And you had better determine it before you turn on your first ad. Let's establish some facts. There is no guarantee that it will take you ten clicks or a hundred clicks to get a sale. Nor is there any guarantee that it will cost 15 cents or a dollar on your CPC. That's why you have to set an overall budget to start out with, and refine from there.
So, let's set an example budget. Say, $500 over the next two weeks. That equals $250 per week. Or $35 per day, every day. That is what you should set to be your daily campaign budget total to start off with. You can always change this later, depending on how much money you've spent. And when your audience is online. But use this as a baseline. So, let's take a look with our $500 budget and see how much did we actually need. Let's say that our conversion rate is 3%. Our spend was $500 which we know, because that was our budget.
And we got 15 sales for that. Those 15 sales, at $20 a pop, got us $300. We didn't so much as break even. We lost $200. So, we need to take another look at this. Something has to change. Let's say that you perform some optimizations on your paid search account, and are able to increase your conversion rate from 3% to 5%. Our spend is still $500. This time, because of the increased conversion rate, we got 25 sales. These 25 sales at $20 a pop, at least we broke even with the $500, so we're a little bit closer.
Don't be delusional. If your average sale is $40,000, because you sell a very fancy, high end, file transfer software solution, don't expect to see 25 cent CPCs and hundreds of leads with a $500 budget. Your budget has to match your industry. Competitive industries need competitive budgets. This is also why you need to start with one product or service, preferably your most popular or profitable one. This may or may not be the same thing. Pick something that will help you determine if you can sell PPC or not. It's not something that you want to sell to get rid of.
The product or service needs to be something that people actually buy. You need to find out what you can get out of PPC first. Or if it's even right for you before you expand. Ideally, commit yourself to running PPC for at least one month, so you can get enough traffic, sales and site interactions on which to make your determination on whether or not to continue. If you're truly managing the account on a per day, or per week basis, you should see improvements as the month goes on, and that should help you determine not only what next month's budget will be or whether or not you've expanded.
Now that you've settled on a monthly budget, let's move on to how to best utilize it.
- What is pay-per-click marking?
- Understanding the pros and cons of PPC
- Creating AdWords and Bing accounts
- Setting up campaigns
- Setting daily and monthly budgets
- Researching and selecting keywords
- Writing ad copy
- Understanding Quality Score
- Leveraging display, content, and partner networks
- Using offline desktop editors