- December 20, 2018
- Posted by: Biplab Poddar
- Category: Google AdWords
How to calculate Google AdWords budget
Opting for pay per click advertisement is a major decision and you may have quite a few queries, such as, will PPC ads bring leads for your brand? Or is your investment worth your expenses and time? Calculation of your AdWords budget will need a thorough research.
In most cases, the answer is yes for Pay per click advertisement has provided high ROI (return on investment) for many businesses particularly in case of local services or time-sensitive services.
And investment in PPC platform such as Google AdWords can have a great impact on your business. In fact according to studies, on an average you can make 2 dollars for each dollar you spent for PPC advertising. This means that most of the advertisers double their investments through PPC platform.
One of the toughest challenges for running a business is to build a proper Google AdWords budget- be it for the new businessmen or the experienced marketers of PPC. Budget planning can be time consuming but overwhelming for you. A properly planned budget is a crucial part of a successful AdWords campaign.
You should be able to understand all the costs of Google AdWords as well as learn how to calculate the estimate of the campaign budget of your brand. Google Ads is not the PPC player for sure but it is undoubtedly the driving one.
The quantity you should spend on Google Ads:
Some of the advertisers might spend till the time they hit a monthly quota. The other advertisers focus completely on the revenues that add guidance to their spending. You should be focusing on maximizing profit within the desired budget for Google AdWords.
You should know a number of data about your company for creating a profitable budget strategy making:
How much should be your budget for your AdWords:-
You can be able to estimate your monthly ad spends when you want to start a Google AdWords campaign as well as make an investment for getting a minimum number of clicks at least 10-15 clicks per day. This is the minimum sample size that is required for seeing potential results within a perfect time frame. Suppose, you are getting less than 10 clicks in a single day, then you are not be able to make an assessment of your account and perform quick optimizations for the ad campaigns.
Service based industries cost you $8-$10 per click but industries such as legal services and other high pricing sectors are much more competitive and may cost you a few hundred dollars for each single click.
Gathering data for budget calculation might be difficult but it worth the efforts.
The number of leads your budget can buy for you:-
CPC (cost per click) is vital for it helps in the calculation of cost per lead. It is the average amount paid to each person who takes any action on landing on your website. The action might be filling forms, contacting your office or at the most making a purchase.
One needs to make a number of assumptions in terms of the effectiveness of the landing pages of your website for the calculation of expected cost per lead. A landing page of your website usually converts anywhere from 2% to 10% visitors and this depends on the industry or sector and its design.
To know the worth of an average customer, you must use your own numbers and statistics for calculation and check if the cost per lead is lower than the average spending amount of a typical customer during the course of their engagement with your business. In case this happens, PPC investment can be a smart move and a profitable choice.
Know the worth of a PPC agency:-
The answer is definitely yes!
But while considering a few facts, it is a matter of fact how you would prefer to pay for the cost required for running an AdWords campaign for your business. Regardless of your choice, you have to bear a cost.
You can run an AdWords campaign all by yourself, this might not require any costs of hiring someone but it will require enough time for you to learn as well as manage AdWords. The time you need to devote for this can be used elsewhere in other important sections of your business. And if you are versed in Google AdWords, the initial learning process can require less time but monthly keep-ups can be a bit time consuming.
There is a second option of hiring a specialized freelancer or consultant for managing your Google AdWords campaign. This can save your time and can be cheaper in comparison to hiring an agency. But you might be taking a few risks as only a single person will be running your Ad campaign. The freelancers might be making some expensive AdWords mistakes. You should take a full time job for managing your Google AdWords campaign of your company or you can sit back or take a long vacation keeping the AdWords management in the hands of the third person (the freelancer).
The best is that you hire a professional agency. It can probably cost you somewhat more than hiring a single freelancing individual but keep in mind that the combined expertise can decrease your cost per lead and this will help you to save more in the long run. An agency will also have a bigger support structure. An experienced team will bring you conversions for your investment. It will also decrease the budget while maintaining the equal number of conversions.
Still confused with the campaign? You can then use the keyword planner of Google AdWords for free:
Head on to your Google AdWords account and open the keyword planner:
Select the first option from the list:
Next, you enter the homepage. You can enter your homepage or landing page for getting keyword ideas based on your website.
While searching through your landing page, you will get a targeted list of keywords. Download the list of keywords.
You can scroll down further you can see related search terms with their CPC (cost per clicks).
You should repeat the same process for a number of keywords. Make sure to jot the keywords down in a spreadsheet.
Keep in mind to include a number of things in your spreadsheet:
- Number of searches per month
This helps you to do the basic calculations that are required for the interpretation of a budget.
Once you collect a few keywords in your spreadsheet with their respective volumes and cost per clicks, it will be easy for you to calculate the costs. You can consider the average CTR (click through rate) and then make the calculation of the number of clicks received on a monthly basis depending on the keywords selected by you as well as depending on the industry you are in. For this, you need to refer back to the list of keywords for analyzing the volumes.
For instance, the volume is 1000 searches per month for one of your keywords, and then you can expect to get 19 clicks per month with an average click through rate (CTR) of 1.91%.
Formula to see the number of clicks per month on a specific keyword:
Keyword volume x average CTR of your industry= clicks per month
Next, multiply the cost per click of that keyword with the monthly clicks.
Formula for the monthly cost of a given keyword:
Clicks per month x cost per click= monthly cost for the keyword
Repeat this simple process through use of both the formulas for each of your keywords you choose to target. In the end, add up all the monthly costs for each single keyword and you can get an idea of the value of your monthly budget.
Once the calculation is done, you can know the amount of money you need to keep aside for your AdWords budget.
If you want to explore a new platform like Google AdWords, you need money. Without it, you cannot do it. But creating a room for your budget is not easy or fun always.
But there are a few ways for creating a Google Ads budget:
Research about the cost of your keywords
You must have an idea of the amount of money you need to keep aside for Google AdWords and you also get an answer to the query that how much is required for Google Ads?
Once it is done, you should be able to conduct a simple and quick audit of the existing budget.
Find out your target keyword CPCs:
You need to pay per click in a Google AdWords search campaign. This means that you only need to pay Google only when a user clicks on your ads.
For instance, your ad pops up in Google search results for say 1500 times a day but it doesn’t get any clicks, then you cannot earn a single penny. This is why Google AdWords is also known as pay per click (PPC) advertising.
While estimating your budget, you should know the amount that is going to cost when any prospect click on your ads. The exact amount depends on the keyword on which you are advertising. Different keywords cost you different amounts, such as Google charges you $3 for “coffee shop” but for keywords like “mortgage broker”, you have to pay a whopping amount of $14. Hence there lies a huge difference in the budget estimates.
Now you may be wondering how to find the CPCs for your keywords. This is really easy for Google provides you with the feature of the Keyword Planner Tool. Find out your target keywords and the Keyword Planner Tool will provide you with an estimate for the cost per click of each keyword. However, these are estimates so you will actually pay more or less in actual.
Test the time frame:
It is important for you to know that you need to have a definite and realistic time frame while building up of an ad campaign. The time frame again depends on your budget as well as your industry. There might not be enough search volume for your target keywords so that you can get leads as well as sales data within a month.
Suppose, the keyword “mortgage broker” is searched 9900 times in a month and if 1% of the total searchers click on your ad, then you can get 99 clicks from this specific keyword. This does not however sound realistic that you will get sales from the 99 customers but definitely you will not be targeting a single keyword. You will target more than one keyword. Your goal should be to make sure that there is enough search volume for the target keywords so that you can achieve your goals within your time frame. In case you have a longer time frame you can then prefer to spread out your monthly budget across several months.
- Sales cycle
The sales cycle step is easy. If it’s over a month, then you need to test for a number of months to get decent data from a test campaign. You can get instant feedbacks from the campaigns once it gets started and your customers buy within a day.
Sales conversion rates
The final step before calculation of your budget is using your sales conversion rates. For instance, if you can drive 99 customers to your website from the keyword “mortgage broker” then the estimate comes round to at least 2 conversions coming in.
- Prospects have to call you, complete filling a web form, or visit your office after clicking on your ads.
- You have to end the sale.
If your goal is to get the customers to complete your web form for scheduling an appointment, then the conversion rate shall be as reasonable as 5% for lead generation. Hence out of the 99 visitors on your website, 5 prospects schedule appointments. Though it is not realistic, let’s assume this.
Let’s talk now about the appointment to client close ratio. If your sales conversion rate is 20% and the sales cycle will run for a few days only, you generate a new client.
Estimation of test budget
Now put all the information together for the estimation of your test budget. The estimate already came as 1 new client from 100 clicks for a single targeted keyword. The example keyword costs $14 per click and for 10 clicks it will cost about $1400 for the generation of one sale.
This means that you need at least $1400 for the initial test for getting a single sale within a month, depending on the CPC, search volume and sales cycle. So if you have a budget of $100 per month, then you are going to take about a whole year to test only a single keyword. You can get a sale quickly but it can also be that it will take longer than your estimate to bring in the first sale for your brand. You should at least keep a budget of $2000 to give a single keyword a fair shot.
As you can understand, there are a number of variables for estimating your Google AdWords budget. So you need to play around with Google Keyword Planner and find out target keywords, CPCs and search volumes.
With a proper and detailed understanding, you can run the numbers based on your sales cycle and conversion rates.