4 Questions to Ask When Determining Your Paid Search (PPC) Budget
Determining a pay-per-click (PPC) budget isn’t easy, even if you’ve been doing it for a while. There are just so many moving pieces—not to mention the stiff competition and high prices for keywords with the biggest payoffs. Some big brands and deep-wallet advertisers even subscribe to a strategy of bidding whatever it takes to secure the top keywords and search results. But no matter your budget size, it can start to feel like a guessing game. How much should you spend, and which keywords are worth investing in?
For those willing to spend the time to solve the PPC puzzle, though, the payoff can be significant. According to Google’s 2017 Economic Impact Report, every dollar spent on AdWords PPC returns $8 to the ad buyer. That’s a huge payoff—big enough that you’re probably telling yourself it’s too good to be true. And it is; that ROI is an average, and any single advertiser’s success rate depends on a host of factors. While getting an eightfold return on your dollar might be a lofty goal to start out with, asking yourself the following four questions will help you make better decisions that lead to better results.
1. How many leads do I need?
One way to determine your PPC spend is to start with your sales goal and work backwards. Let’s say you want to acquire a single new client per month and that your close rate on existing leads has been about five percent. If we do a little math, we see that it’ll take 20 leads per month to seal a new deal each month:
1 conversion / .05 close rate = 20 leads needed per month
Now let’s say your historic cost per lead (CPL) has been $50. Just multiply that by those 20 leads and your budget comes in at $1000 per month. Of course, close rates may vary, especially if you’re trying out different channels. But it’s not hard to adjust your budget working from this formula based on wherever your close rates (or sales goals) may fluctuate. If you get too caught up in what you think your competitors are spending and what you should be investing, it’s easy to get off track and spend in ways that might not make sense for your business.
2. How do keywords impact cost?
Let’s say you’ve picked your top 10 search terms and your keyword tool tells you they all yield around 500 searches (combined) per day. That’s about 15,000 per month. Not bad. Now, an average click-through rate (CTR) is about two percent. That means there’s about 300 potential click-throughs based on those 15,000 searches. But potential CTRs aren’t quite as good as the real thing; competition will eat into some of those 300 clicks, generally to the tune of about a third. But it’s a place to start.
As you finalize your list of keywords, it’s time to determine how those click throughs will impact your budget. This is where cost-per-click (CPC) comes in. CPC can vary a lot, as their value is dependent on the demand of the keywords you’re using.
For illustrative purposes, let’s say your CPC is about $2.50 (which is roughly the average across all industries). If you get 300 clicks at two and a half dollars each, you’re looking at a $750 spend. If your budget can handle more or you’re not thrilled with the number of clicks you’re likely to see, pick another 10 keywords, or another 50.
If you’re on a limited budget, one of your top priorities will be to lower your CPC. Consider that you may do better with a larger variety of lower-demand but more specific keyword terms; high-cost, high-demand keywords are often too broad if your business is highly differentiated. Try as many combinations as you can, entering every landing page on your site into Google’s Keyword Planner. There’s a sweet spot between keywords that have decent traffic and relatively low competition from other advertisers. You’ll find it if you keep trying.
3. When and where should I advertise?
PPC advertising can be targeted geographically. You can target a few zip codes around your business, go national, or even global. Regardless of where you’re located, you may get better leads from different areas with different demographic makeups, so it’s important to experiment—and some high competition areas may cost more. It takes testing to finetune your geographic targets and make them work with your budget.
Similarly, certain times or days will likely pay off better than others—or are more practical for your business. If you have phones manned only during certain hours, for example, you can schedule call extensions or call-only ads while there’s someone there to answer. Remember, calls convert about three times more frequently than online click-throughs. This can have a big impact on ROI and help you determine the value of PPC to your business and how to allocate your dollars.
4. Is my CRM doing enough?
When it comes to determining your PPC budget, your CRM is another important tool. Is your CRM tracking customer hits from all of your channels—paid and organic, online and offline? Does it integrate with Google Ads and other keyword planners? If not, there are tools that can help. CallTrackingMetrics’ call intelligence platform, for example, is able to track conversions and calls coming through your PPC channels, supplementing CRM functionality with a customizable reporting dashboard that tracks times, locations, call durations, call scores, conversion rates, the revenue generated by any or all of your call sources, and more. You can also view activity reports that show call totals for each phone number, source, campaign, and so on, and break those totals out by unique and first-time callers.
A good CRM should take the guesswork out of PPC, not only helping you justify the spend, but also ensuring you get the most return for it.
This level of detail enables you to determine what’s working and what’s not, and even calculate the ROI of your call-enabled paid advertising, helping you fine-tune the “when” and “where” we discussed earlier. For example, are you getting more calls or conversions on weekdays than weekends? Set your ads to run Monday through Friday, and so on. Are you finding more success on certain keywords or channels? Refine your budget to allocate more towards those areas. Remember that a good CRM should take the guesswork out of PPC, not only helping you justify the spend, but also ensuring you get the most return for it.
Keep Calm and Adjust PPC As You Go
The four questions above are just a diving board into the deep pool of PPC—and there’s a lot more to discover. Yes, it’s complicated. But it’s also something you can adjust over time and finetune until you find the right combination of keywords, leads, places, times, and other factors. Start with a goal, make considered choices, don’t be afraid to experiment, and, if your PPC campaigns are driving a positive ROI, scale up. You’ve got more to gain than lose—maybe even eight times more.