How to Determine Your PPC Budget


August 24, 2021

A common question that digital marketers hear a lot is, “How much should I spend for pay-per-click (PPC) advertising?”

The answer is: it depends. There are many factors that come into play when determining the size that your PPC budget should be. All you need is a bit of research to get a good estimate.

4 Factors to Consider When Setting Your PPC Budget

PPC advertising allows you to funnel traffic into your marketing systems fast, but your costs can quickly balloon if you're not careful. Here are four factors to consider for setting a PPC budget that drives conversions and reduces wasted ad spend. 

1. Account Size

The bigger your account, the more likely you’ll need a heftier budget to keep your ads active throughout the day. This factor is probably the biggest when determining the size of your budget. The number of campaigns, ad groups, and keywords that are in your account will help you determine its size.  

2. Geographic Area

Another factor that plays into the price is the geographic location(s) you’re targeting. If the areas you’re targeting have a higher population, your budget will be higher because you'll end up competing against more advertisers.

3. Industry CPC

Depending on your industry or niche, the keywords that you’re targeting could have a higher CPC. Some may cost only a few pennies, but more competitive keywords can range between $5-$25. The more expensive your advertising space is, the higher your budget will need to be to compete. 

To find average CPCs for your industry, use the free Google Ads Keyword Planner to get search volumes and bid estimates for your keywords.

4. Conversion Rate

Conversions can be many different things. Some businesses consider a conversion to be a lead generation strategy like capturing a prospect’s information, while others look at monetary sales as their conversion.

Depending on what type of conversion you’re after and what type of offer you have, your conversion rate can fluctuate.

When you’re selling a physical product, the conversion rate is likely to be lower than when you’re giving away something for free in exchange for personal information, such as a newsletter signup or free download.

Also, a brand new PPC account probably isn't going to have high conversion rates without at least a few months of optimization. There are always exceptions but generally, it’s best to expect a lower conversion rate at the start.

Test & Fine-Tune Your PPC

The process of selecting the right PPC budget for your business is never perfect at first. The idea is to set a budget using the data at hand, then adjust it based on the performance of the account.

If you set your budget too low, it may take much longer to see the results you want. PPC is a data-driven platform. This means that the more data coming in, the quicker certain pieces can be tested and improved. If there isn’t any data, then the improvements, and ultimately conversions, will take much longer to show.

Another benefit to testing some ads is that you will begin to see how much it costs to get a conversion. By finding these metrics, you can figure out how much you should be spending on PPC.
 
Want Pay Per Click programs that will scale your business? Work with SMT! Visit www.SMTPPC.com for more info on our PPC program.

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