How to Calculate Your PPC Budget: A Guide for Businesses
As much as we would like them to, customers generally don’t come into our business looking to purchase products or hire us to provide services without something leading them to our lobby or e-commerce website. That’s where having an effective and robust marketing strategy comes into play.
A well-thought-out marketing strategy should guide your business on a monthly, quarterly, and annual basis. The strategy should also consider how much revenue should be generated based on how much you’ve spent on paid ads, website maintenance, and other marketing-related costs.
Marketing plans create layers of strategies that help guide customers from external platforms back to your internal channels and websites, where your sales team can focus on lead conversion. While content and engagement play significant roles in inbound marketing channels, Pay-Per-Click strategies also play an important role in leading potential clients back to your sales team. However, these PPC strategies should not be a one-size-fits-all approach, and in fact, are best deployed when scaled to the size of the business.
Breaking Down The Specifics of a PPC Campaign
A pay-per-click campaign is built around creating highly targeted advertisements on specific ad platforms, such as search engines, and then paying a fee for anytime the ad is clicked on by a potential client. In order to create effective pay-per-click campaigns, your organization must have a clear understanding of the target audience and the market in which you’re operating and use that understanding to create highly specific buyer personas. With buyer personas firmly established on a foundational level, it will be easier to construct efficient advertisements.
However, constructing these campaigns requires an overarching cognizance of how the structure impacts the costs of these campaigns. Before we consider costs, however, we have to consider the key elements that go into an effective PPC advertisement campaign.
A primary component of PPC campaigns is that you’re paying to use keywords relevant to your messaging and brand. Using tools like Google’s Keyword Planner, businesses can avoid wasting money on extremely competitive keywords, the wrong keywords that attract customers unlikely to buy, or keywords that end up being meaningless to your target audience.
It’s important to choose keywords that are competitive and affordable to balance the cost of the campaign while remaining focused on words showing intent to convert. Marketers should balance relevant keywords with an appropriately high search volume. With the growing use of voice search across devices, brands are finding that long-tail phrases are increasingly providing more value in the PPC realm. Long-tail phrases increase the ad copy’s relevance in which they appear and trigger the ranking algorithms of search engines looking for natural speech pattern matches to search queries.
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Advertising Copy Executed with a Purpose
The type of ad you create to execute your PPC campaign will heavily depend upon what you’re trying to accomplish. Increasing lead generation and inbound calls are one type of ad, while brand awareness and product education are another. Attracting new customers is another altogether. Choose your goal and correlating type of ad, then create ad groups to test out different formats and copy in order to fine-tune each ad you create.
Content is King For PPC Campaigns
It’s important your copy team creates engaging and impactful ad copy that will be in turn supported by the more mechanical, data-driven keywords and ad format. Focus on the pain points you’ve identified in buyer personas to inspire the right messaging and language.
The most important element to remember behind all of this is that your PPC advertising campaigns are driven almost exclusively by the amount of money you invest into the foundation.
Creating the Right Budget for Your PPC Campaign
There’s no magical chart or number your marketing team or managed services partner can point to when you start talking about creating a PPC budget appropriate to your business’s size. Instead, you’ll need to break out your historical sales data and spreadsheets. To create a PPC budget that meets your organization’s needs, you’ll need to have a grasp of a few key metrics from past sales performance or sales projections if your organization is fairly new.
In order to establish your overall Pay Per Click budget, you must be able to:
- define your number of customers
- your average conversion rate at the sales team level
- your website’s average conversion rate of visitors to leads
- the cost you’re paying in your PPC campaign
From this data, you can construct the necessary formulas to budget out the PPC campaign that you can then work with your marketing team to convert into actionable live campaigns. So let’s first talk about what values we need to establish at the start to calculate cost-per-click.
Number of Customers—At a basic level, you need to know how many customers minimum you need visiting your site or viewing your ads. This number will be impacted heavily first by your website’s conversion rate of visitors to leads and then by your sales team’s conversion of leads to sales.
Revenue—You must know what your revenue target is for this campaign. That target revenue is what your leadership team has determined necessary to meet stakeholders’ needs or the organization itself. This number is often considered monthly or quarterly, so it’s important to establish from the start the sales period your campaign is tied to.
Average Sale Per Customer—Your ad campaign is likely tied to a specific product or service, so it’s important to include the average sale per customer in your calculations to help establish a proper target customer count.
With these values in hand, you can calculate out first the required number of customers to meet your target as:
Number of Customers = (Revenue target / Number of Sales Periods Campaign Will Run) / Average Sales Per Customer
Using that value for the number of customers (NoC), you can then establish your PPC budget sufficient for your company size as follows:
PPC Budget = [(NoC/ Sales Team Conversion Rate) / Website Conversion Rate] * Cost per Click established by Ad Platform
How the Size of Your Company will Impact Your PPC Budget
Company size plays a significant role in creating a PPC budget. Larger organizations with more revenue requirements necessary for sustaining a larger, broader infrastructure, will of course mean that either more campaigns or larger scale campaigns will have to be executed to achieve targeted income from PPC campaigns.
Conversely, with smaller organizations, it will be necessary to be extremely efficient and targeted in creating such campaigns – with extra attention given at the front end of the planning process to ensure PPC campaigns are executed as efficiently as possible with no wasted costs in inefficient ads and keyword identification.
Other Methods for Defining An Effective PPC Budget
For businesses that are extremely new and don’t have the historical data to calculate a proper, informed budget, there are other data-driven methods to accomplish the same outcome. Many of these methods revolve around competitor analysis – that is, finding businesses selling similar products or services and determining what those competitors are spending for advertising, which keywords they are using, and what products they are advertising. Performing in-depth competitor analysis helps new businesses hit the ground running and make informed marketing decisions from the start.
Getting the Most Out of Your PPC Campaign Requires Planning and Attention, But the Rewards Outweigh the Effort in the End
Proper budgeting for a PPC campaign requires significant attention from your marketing team or managed service provider. However, the benefits of a well-defined and executed campaign can have an immediate impact on your bottom line.
Unlike other SEO strategies, PPC campaigns can have an immediate and significant impact on the amount of click-through traffic to your website.
Properly structured, you can easily track the increased traffic source back to the PPC campaign and show leadership the impact and value such programs provide.
With a well-researched buyer persona’s in place, you also have the ability to laser-focus your advertising at exactly the demographics you know will bring you sales, boosting the ROI significantly over other channels.
Overall, very few SEO solutions provide the same level of value and return as that of a well-designed and thought-out PPC campaign.