Maine Internet Marketing Services FAQ: PPC Budget: Green Sky Development

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How much should I spend on my pay per click (PPC) budget?

This is a popular question I am often asked and there is no single best answer. How much you should spend really depends on your goals, the available marketing budget you have to work with, and the keyword strategies you choose to use.

In my experience, spending $500 a month, or about $16/day, is the least you can do and get measureable results.

Pay per click is what is says. You only pay when someone clicks on your ad. The cost per click (CPC) depends on how competitive the keyword phrase is (market supply/demand), your “match” type, and the overall quality score you receive for that keyword. The quality score is a metric that is applied to your keyword and it is dependent on how well your ad groups and keyword choices are structured as well as the quality and relevance of the landing page the ad group and/or keywords take people to once clicked.

So for example, if the average cost per click for a phrase is $1.00 and your budget is set at $16/day, you can expect 15-20 clicks to your web site. Is that enough as determined by your goals? If you are a brand new website and you have very little initial traffic, this approach may work for a few months. If you are a well-established e-commerce site, this will probably be way too little to accomplish anything.

When it comes down to it, how much you spend on your PPC budget depends on how much your company is allowing you to spend on this marketing channel (at least to start) and how profitable your overall campaign is.

Spending money on AdWords, AdRoll, AdCenter, Facebook Ads, LinkedIn Ads, or any other PPC platform should always be profitable otherwise there is no point in doing it. If you are selling products online, it is very easy to determine profitability. If you are offering a service and you know the costs per service or have an average cost per service, calculating profitability is easy as well. In the absence of “sales”, you can measure profitability by cost per acquisition (CPA), or how much you are willing to pay to acquire a customer or sale (and in fact, those two things are probably different).

The point is this; if you are investing money to acquire customers, produce sales or leads, or provide visibility to your brand, you need to know 3 things:

  1. How much you are willing to pay to get a sale, lead, or impression. Your CPA.
  2. What that sale, lead, or impression costs you (how much of every dollar you make is spent getting that dollar = gross margin)
  3. In general, how many visits to your site do you need before someone buy something or contacts you (conversion rate).

When you know your cost per acquisition, your profit margin, and your conversion rate, you can then make a more informed decision as to how much money you should spend to realize a profit.

Lastly, how well your allotted budget works depends on the quality of management of your pay per click campaign and the strategies that are used to acquire clicks.

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