Approximately 65 percent of all clicks made by searchers who are ready to make a purchase go to paid advertising (i.e., pay-per-click ads). So, what should you spend on PPC (pay-per-click or paid advertising)? This is a question many businesses ask. Regardless of whether you are starting out with PPC, launching a new strategy, or reevaluating your approach, ensuring you are investing properly is essential. What your business is spending on paid advertising will not (and should not) be static. Your budget should change because goals change & spending changes. There is no right answer…however, you should have a “method behind the madness.”
Step 1: Determine Your Goals
Before diving into the dollars & cents of your PPC campaign, you must define what you are spending for. Setting quantitative, actionable goals & a timeline for your PPC spend is essential. If you have a goal that feels vague or unattainable, it probably is. Be sure to use Drucker’s SMART (the acronym that stands for – Specific, Measurable, Achievable, Relevant, Time-bound) goal setting technique.
Ask yourself questions like:
- Do you want new customers?
- Do you want to attract more customers?
- Can you only provide service for a few customers at once?
- Do you have unlimited funds to get new customers or a limited budget?
Some of the most common goals for businesses include:
- Customer acquisition or ROI-focused lead generation (i.e., you want 200 new customers in 30 days and to pay less than $50 per customer)
- Customer acquisition growth or absolute lead generation (i.e., you want to gain 200 new customers in 30 days, no matter the cost per customer)
- Brand awareness (i.e., generate five million impressions to possible customers in 30 days)
When you figure out your goal for PPC spending, you can begin to form a campaign plan. Consider the specific action you want your searchers to take. This may be to call your store, visit a landing page, fill out your online form, buy a product, or learn more about your services. How are you going to measure this? The best way to measure this is by tracking the conversions you achieve.
Step 2: Figure Out Traffic Generation Requirements
Once you know your goal & have a timeline, start the next step of traffic generation requirements. Determine how much traffic needs to be driven to reach your goal within the set timeline. Rather than guessing about this, use historical data from your analytics platform for estimations.
Step 3: Research Customers Per Click (CPC) Cost Estimates
You can find information for CPC estimates in two locations: Historical data; Current PPC efforts.
Step 4: PPC Budget Calculation
Once you have figured out your goals, the amount of traffic you need to meet the goals, & the cost of this traffic, determining your budget is easy. Using your traffic & the average CPC estimate ranges, you can determine your budget with this formula: Traffic Required X Average CPC = Your Total Budget.
While setting a PPC budget may seem challenging, it doesn’t have to be. With these steps, you can create a budget that works for your business, which won’t blow your marketing spend. If you want more help with budgeting, sign up for a free mentoring session.
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