Managing your PPC budget is one of the most important components of any web marketing strategy. Whether you are a newcomer or an experienced professional, you should regularly ensure that your expenses are optimized.
Define your lead
The most important factor in your budget planning is of course to understand your needs in terms of leads (business opportunities). You must therefore determine:
- The expected quality of the leads
- The lead price you’re willing to pay (CPL)
- The consumption cycle of your visitors/consumers
- The frequency of their visits
- The geographic area
If you do not know exactly how to fix the expected quality of your leads, you may ask yourself the following questions:
- How much am I willing to spend?
- What value can I get from a lead?
- What is my current conversion rate (how many leads per conversion)?
- What is my PPC/Lead ratio: PPC spending in order get a lead (it gets a bit confusing…)?
What’s the minimum PPC budget I should spend to start a campaign?
As a summary is often better than a long speech, here is the reasoning you can adopt to define your budget:
If you want to acquire 150 new clients per month and your conversion rate is 15%, you will need to acquire 1,000 leads at 20 dollars each to reach your goal. Your PPC budget will be 20,000 dollars per month. If each customer earns you an average of 250 dollars per month, your profit (if your PPC budget is your only cost) is equal to (250 × 150) – 20,000 or 17,500 dollars.
How is your cost per lead determined?
The value of your lead is determined by several factors:
- The geographical area: Are your leads more precious according to a specific geographical area? Does your market involve a province or a whole country?
- The consumption cycle of your customers: Do they need several visits to your site before deciding to buy?
- Bounce rate/average time per visit: How do your visitors behave once they arrive on your site?
- Your history: how have you performed in the past?
You can improve the performance of your PPC campaign and therefore better control the quality of your leads by performing a strategic segmentation. For example, you can list keywords that do not bring you (or bring you little) traffic and exclude them from your campaign.
You can also exclude places where you do not want your ad to appear. By carefully selecting your keywords and placements, you can allocate more of your budget to a particular keyword or location.
Also do not forget to analyze the hours or days when you get more traffic. For example, if you find that the majority of your traffic takes place on weekends between 2 pm and 8 pm, it is better to increase your budget for this period and reduce it during off-peak periods.
Search for new opportunities
Does doubling your budget bring you double the leads? How can you identify the gain from each dollar spent?
It may be difficult to assess the influence of a budget change on your results, but Google offers some tools to get a more detailed view. So do not hesitate to read Google’s help in your AdWords tool. For example, if you see an indicator that informs you that your campaign is off budget, you can use the traffic forecasting tool that will calculate the volume you can expect by allocating more budget to your campaign. Stay alert and do not blindly follow the advice given by Google, which can sometimes make you spend more.
If you liked this article, you might like this one: How to build your web marketing strategy?