Many businesses struggle to define a proper PPC budget. Most often budgets are just pulled out of “thin air.” This article will give you a simple strategy for creating a pay-per-click budget to run on Google AdWords.
Clearly defining goals is KEY. I’m sure that no one is interested in spending advertising dollars for fun. Clear goals will help you make smarter decisions once your pay per click advertising campaigns are running.
Here are a few key questions to ask yourself:
- What is the lifetime value of each customer you gain?
- How many customers do you hope to acquire and in what time-frame?
- Is there a limit to your marketing budget?
- Are you committed to making ppc advertising a staple of your overall marketing strategy or is this just a small test?
Once these questions are answered you can start to create a budget.
Two key components that determine the success of a ppc marketing campaign is your CPC (“cost per click”) and Conversion Rate.
Research Average CPCs for Your Industry
First thing is first, let’s find out how much you will have to pay each time a user clicks on your ads.
Use a Keyword Tool
The easiest way get an idea of your pay per click costs is to use a keyword tool. I recommend SpyFu.com but you can also choose from many other tools throughout the Internet.
Approximate Your Conversion Rate
Conversion rates are arguably the most important part of the entire campaign. A slight change in conversion rate can mean the difference between failure and amazing success.
Below is a basic list of average conversion rates (for a sale, not a lead).
Under 1% = Bad Conversion Rate
Less than 1 out of every 100 visitors becomes a client
1% – 3% = Average Conversion Rate
1 to 3 out of every 100 visitors becomes a client
3% – 10% = Above Average Conversion Rate
3 to 10 out of every 100 visitors becomes a client
Over 10% = Where Every Business Should Strive To Be
More than 10 out of every 100 visitors becomes a client
Note: conversion rates can vary dramatically between industries and depend on the value your website and product and/or service provided vs. the competition.