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Pay-per-click marketing involves spending money to earn money. The challenge lies in determining the optimal budget.

Your PPC strategy relies heavily on your monthly and annual budget. Regardless of your experience in PPC, it is beneficial to reevaluate your budget to ensure you are getting the best possible results.

To create an accurate budget, it is essential to understand your lead requirements:

  • Lead Quality.
  • Target Cost per Lead (CPL).
  • Purchase Lifecycle.
  • Visitor Frequency.
  • Geographic Targeting.

To clarify the desire of your prospective lead, consider the responses to these questions:

  • What is my available budget?
  • How do I assign value to a lead?
  • What is my existing conversion rate?
  • How many PPC-generated leads do I require?

To help you make informed choices regarding your PPC budget, we will assess the essential details more closely.

What Budget is Necessary to Begin PPC Campaigns?

Once we know define the answers to the above questions, you can do calculations based on the below graph to help you establish a realistic budget:

With a monthly requirement of 30 new clients and a close rate of 15%, you must strive for 200 PPC conversions to generate 15% leads. With a cost of £5 per lead, you require a monthly budget of £1,000 to generate that many leads and clients.

What is ROAS?

Return on Ad Spend (ROAS) is a key performance indicator that measures how effectively advertising spend generates revenue. It is calculated by dividing revenue from ads by ad spend.

For example, if a campaign generates £5,000 in revenue with £1,000 spent, the ROAS is 5:1 (£10,000 / £2,000). A ROAS over 1 means a positive return on investment (ROI). ROAS is used to optimise campaigns, allocate budget efficiently, and forecast revenue.

Factors Influencing Lead Valuation?

Here are some factors that influence the value of a lead:

Geography: Are leads more relevant based on location? Are certain areas more valuable to you?

Frequency of Interaction: Does the lead engagement involve multiple touchpoints before conversion?

Bounce Rate/Time on Site: How do users behave post-click? What is their interaction with your site and what is their average dwell time?

Priority: What past criteria have proven to be qualified leads?

Improving Lead Quality in PPC

You can enhance lead quality in PPC campaigns through segmentation strategies such as:

Negative Keywords: Filter out terms that don’t convert.

Placements/Site Exclusions: Control where your display ads appear.

Dayparting: Adjust bids based on time of day and day of the week.

Segmentation also helps assess budget allocation effectiveness. For instance, analysing PPC ad performance across different times and locations may reveal that CPL is notably higher on Saturdays, especially for international traffic, compared to other days of the week.

At this stage, it is crucial to consider:

Are the leads generated on weekends worth the added expense?

Would it be sensible to scale back?

This is where bid adjustments or tweaking your ad scheduling can be invaluable, optimising budget allocation.

Seeking Growth Opportunities

Will doubling your budget result in a doubling of leads?

How can you gauge the incremental gain from each pound spent?

Estimating the impact of budget changes on your outcomes can be challenging, but Google provides tools to assist you in this regard.

You have likely encountered the ‘Limited by budget’ notification in your Google Ads (AdWords) account at some point. In response, Google offers a tool that estimates the additional clicks you can anticipate (and their associated costs) if you increase your budget:

As evident from the Google Ads Traffic Estimator (now integrated into the Keyword Planner tool), Google identifies growth opportunities for your business. By increasing your budget by X amount, you could potentially achieve Y results. If you haven’t explored budget expansions extensively, these estimations from Google offer insights into the untapped traffic potential.

This table outlines a method for tracking your budget settings and refining your allocations over time. By calculating your daily expenditure, distributing the remaining budget across the month, and identifying necessary adjustments alongside estimate data, you can effectively plan your budgets for the future.

Factors to Consider When Establishing Budgets

Now, let’s explore how various scenarios influence your PPC budget, such as:

  • Keyword Selection.
  • Search vs. Display Network.
  • Search Engine (Google vs. Bing).
  • Device Targeting (Mobile vs. Desktop/Tablet).

High Funnel Keywords vs. Conversion Keywords vs. Brand-Specific Terms

When deciding on budget allocations for various keyword types, consider the following categories within your lead funnel:

High Funnel Exploration

At the top of the funnel, potential customers are in the early stages of exploring options. They’re not yet ready to make a purchase. Here, we target top-of-funnel informational keywords. While valuable for building awareness, these keywords aren’t as directly tied to conversions as those lower in the funnel.

Consideration and Narrowing Down

 Moving down the funnel, individuals are narrowing down their options and becoming more likely to make a purchase. This phase represents an opportunity to increase brand awareness and trust. Keywords at this stage hold greater value as they signify potential conversions.

Bottom-of-Funnel Purchase Intent

At the bottom of the funnel, customers are in the final stages of the buying process and are ready to make a purchase. Here, keywords represent “ready-to-buy” intent and deserve a larger portion of your budget due to their higher likelihood of conversion.

Here’s a practical budget model example:

Branded Searches: Ideal for boosting account Click-Through Rate (CTR) and reinforcing brand presence.

High-Funnel Keywords: These are typically lower Quality Score terms, resulting in higher costs. They direct users to informational offers, which may have lower immediate value.

Low-Funnel Keywords: These keywords often face stiffer competition but boast higher Quality Scores. They drive traffic to trials, demos, or direct sales, offering greater value to your business.

While these are foundational principles, feel free to adjust your budget allocations based on specific circumstances.

Search vs. Display Allocation

While the average budget share allocated to the Display Network on Google stands at 19%, we opt for a significantly higher percentage – nearly half. Why the disparity? We leverage remarketing as a form of conversion rate optimization, targeting recent visitors to keep them engaged and ultimately convert.

Adjusting the percentage of your budget spent on Display should consider two key factors: your industry and competition level. Certain industries, such as travel and automotive, boast higher average conversion rates on the Display Network compared to traditional search. In such cases, allocating more budget to display may prove beneficial.