How to Determine Your Ad Spend & Keep Your Budget on Track

Jan | 09BY venta

With most small to medium-sized businesses, ad spend can be a sticking pain point — from both a budget and a tracking perspective. I’m sorry to squash any hopes of you discovering a magic bullet to PPC advertising, it just doesn’t exist. However, the good news is that there are several steps you can take to better increase your odds of success.

The first is defining or understanding the spend culture that exists at your company.

Democratic Ad Culture – In this atmosphere, ad spend is flexible and presents greater autonomy in altering the budget limits. This freedom allows for quick changes for PPC campaigns and is comfortable with taking budget risks.

Administrative Ad Culture – This spending atmosphere has set processes in place for determining ad spending habits, changes, and goals. In order to make alterations to the budget, various levels of approval must be met. In addition, budgets are often hard-capped in administrative ad cultures.

The next step is establishing a budget hierarchy. This involves laying out what the structure of your campaign will look like. Some questions you may need address include:

  • What product/service are we advertising?
  • What region are we geotargeting?
  • Who is the ideal target audience?
  • What are CPC goals?
  • At what point do we increase, decrease, or stop ad spend?
  • What is the most we are willing to pay for “XYZ” keyword?
  • How do we allocate the budget to various keywords?

Once these two factors have been answered, it is easier to move into generating some type of formula for determining the right ad spend for your company. Let’s begin…

How to Determine Your Ad Spend

Determining ad spend for a PPC campaign is similar to A/B testing in the fact that it requires both the necessary time to gain accurate results, but it also calls for constant experimenting. Like mentioned before, there is no secret ingredient to determining what the “goldilocks” budget looks like for your company, therefore, you need to be open to trying new ideas and techniques.

In order to best estimate what a “good budget” might look like for your company, you need to examine the value of PPC advertising for your industry. Paid ads perform extremely well for certain industries, while other industries are better off shifting the majority of their budget to SEO or other marketing avenues.

Follow that up with breaking down what the value of a customer is to your business — what does the average customer spend per transaction? What you are wanting to identify is your EPC or earnings per click. This is easier done with past PPC campaign performance. By multiplying your conversion rate by your customer value then you can have a rough estimate of your EPC.

Ex. The average customer spends $50 per transaction, and you have a one percent conversion rate on your PPC ads. (50 x .01 = $0.50)

Knowing your EPC can help you balance what you view as acceptable to spend on your target keywords. Additionally, defining what KPIs or key performance indicators matter most to your company helps when determining ad spend budgets.

Is it:

  • CPC?
  • Click-through rate?
  • Lead quantity?
  • Total sales?
  • Etc.?

Generally, you see small to medium-sized businesses spending anywhere between 7 to 12 percent on marketing budgets and up to 25 percent for companies looking to scale at a faster pace. With traditionally media advertising dying out, digital ads have skyrocketed in the past decade. When determining your budget for PPC ads, you need to collect all possible data and make an informed decision on the dollar amount — and then start adjusting as results start to show. Be sure to focus on the ROI at the end of the day, not the total ad costs.

How to Keep Your Budget on Track

The next step is keeping your budget operating within the green. PPC ads are not a “set it and forget it” type of digital advertising. They require regular monitoring as traffic, competition, and price all fluctuate on a daily basis. Therefore, keeping your ad campaigns top of mind will help ensure your budget is best invested.

Here are a few quick tips to help keep your budget on track and protecting your bottom line:

  • Start the campaign on a small scale, once it starts returning a profit, increase the budget
  • Limit the number of keywords you target
  • Include negative keywords in your campaign
  • Set ad scheduling (ex. only show ads during the times of 7 am – 7 pm, Monday – Friday)
  • Keep geotargeting hyperfocused in areas you have established customer populations, then expand out
  • Ensure ad tracking is set up in Google Ads to best track daily, monthly performance

Need Help With Your Ad Budget?

At Venta Marketing, we are helping businesses meet their goals head-on. As leaders in the digital marketing industry, we know what goes into PPC advertising campaigns — including how to budget. Contact us today to inquire about our web services!