PPC advertising is one of the most effective ways to reach your target audience and drive traffic to your website. But without a proper budget, your PPC campaigns will be ineffective.
Your PPC budget should be based on your business goals and the amount of traffic you need to generate to achieve those goals. It’s also important to consider your target audience and the cost of keywords in your industry.
Once you have a budget in mind, you can develop a PPC strategy that outlines your goals, target audience, and keyword strategy.
So, how much should you invest in PPC to achieve your marketing goals?
That’s a question crucial to both the marketing team and the C-suite. But if the relationship between marketing and the corner office is tense, it can derail success.
You need to know the right questions to ask CXOs so you can get them to sign off the marketing budget with confidence, knowing that your marketing strategy aligns with your business goals.
Marketing directors need courage to challenge the status quo and advocate for the customer, even when the organisation is inwardly focused and risk-averse.
So how to solve the problem? Ask yourself these few questions before each planning round: if I were the CEO or CFO, what would I do to challenge the plan and make it as strong as possible?
Here are five questions to ask yourself before approaching the C-suite:
- Set A Clear Profitability Goal:
“Does this marketing plan support the company’s growth goals?”
If you want to achieve a measurable outcome from your Google Ads campaign, you need to start by setting a budget. To do this, you need to know the answers to the following critical business questions:
- Average order value (AOV): How much does the average customer spend on each order?
- Gross margin percentage: How much profit do you make on each sale?
- Cost per acquisition (CPA): How much does it cost to acquire a new customer?
If you don’t know your CPA, set a goal to remain profitable.
Use this formula to determine your ideal budget:
Number of Sales * AOV * Margin - Budget = Profit
- Uncover Insights from Your Past Performance:
“Are we focusing on the most effective ways to grow, before spending money on advertising and promotions?”
If you’re running a paid search program, use this powerful tool to analyse your budget:
Impression share lost due to budget shows you how much of your potential audience you're missing out on because your budget is too low.
To find this metric:
- Go to your Google Ads account.
- Click on the “Columns” button and select “Modify columns.”
- Under “Competitive metrics,” check the box next to “Search impression share lost - budget.”
- Click “Save.”
- Now, you’ll be able to see how much impression you’re losing due to the budget for each keyword and campaign.
If you’re seeing a significant amount of lost impression share, it’s time to increase your budget. You may also want to consider adjusting your bidding strategy to focus on the keywords that are most important to your business.
- Do the Math:
“Can I show how advertising and brand building will lead to future performance benefits, such as increased sales and profits?”
Are you losing potential customers because your budget is too low?
Search impression share lost due to budget means people are searching for keywords related to your business, but your ad isn’t showing because you’ve run out of money.
To reduce this percentage, increase your daily budget for the affected campaign.
Here’s how to calculate how much to increase it by:
- Select a date range of “last 7 days.”
- Divide the number of impressions you actually served by your search impression share percentage.
Example:
If you served 500 impressions with a search impression share of 60%, then your maximum number of ad impressions possible for the seven-day date range was 833 (500 impressions / 60% (search impression share column) = 833 impressions).
To increase your daily budget so that your ads show for all relevant searches, increase it to 833 impressions per day.
Note: You don’t necessarily need to increase your budget to the maximum number of impressions possible. You may want to start with a smaller increase and then adjust your budget based on your results.
- Focus On The Right Key Performance Indicators
“Can I track key performance indicators (KPIs) to show that we are delivering on our promises?”
It’s important to know the right KPIs to focus on. For instance, do not prioritise these marketing vanity metrics:
- Engagement: It’s easy to get people to interact with your content, but that doesn’t mean they're buying your products or services.
- Content Flow: Just because you’re publishing content doesn’t mean it’s effective advertising. Make sure your content is high-quality, engaging, and relevant to your target audience.
- Impressions: Impressions are a meaningless metric. Focus on metrics that measure how many people are actually interacting with your website and taking the desired action.
Use the number of impressions to understand whether your campaign is making any real impact or not.
Once you know the maximum number of impressions your campaign could have generated, you can calculate how much more budget you need to capture all of those missed opportunities.
Here’s how:
- Missed impressions = Max impressions * Lost impression share (%)
- Missed revenue = Missed impressions * CTR (%) * CPC
- Additional budget needed = Missed revenue
- Average daily budget = Additional budget needed / Number of days ads run
This formula helps you calculate how much lost revenue you’re incurring due to budget limitations, and how much you need to increase your budget to fully fund your campaigns.
Example:
If your campaign could have generated 10,000 impressions but you lost 30% of them due to budget, then you missed 3,000 ad impressions. If your CTR is 5% and your average CPC is $5, then you missed $750 in revenue.
To fully fund this campaign, you would need to increase your weekly budget by $750. If your ads run 7 days a week, then your average daily budget should be $107 per day.
- Cut Out All Unnecessary Spends:
“Have I cut all unnecessary spending to show that we are focused and not wasteful?”
Your daily budget is like a spending limit on your credit card. Remember that Google may overspend your daily budget on a given day, but it will not spend more than 30.4 times your daily budget over the course of a month.
However, if you see the “limited budget” flag, don’t just increase your budget right away. Instead, take a critical look at your time of day reports to see when and if you’re running out of budget.
If increasing your budget is not an option, you can try to improve your keyword Quality Scores. This can help to decrease the amount you have to pay per click and ultimately the amount you spend.
A high Quality Score means that your ads are relevant to the keywords you're bidding on and that your landing pages are relevant to your ads. This can help to improve your click-through rate (CTR) and reduce your cost per click (CPC).
Open and honest conversations about these questions will help CEOs and CMOs work together at their best.
It’s important to start these conversations, but don’t let them end there. Once you’ve established a productive dialogue, both parties should commit to revisiting these questions regularly to make sure you're still on the same page and committed to working together.
Looking for a fresh perspective for your PPC campaigns? Let’s talk.
At 360 OM, we specialise in helping businesses take their marketing efforts to the next level. Our team stays on top of industry trends, uses data-informed optimisations to maximise your ROI, and provides full transparency through comprehensive reporting and dashboards.
