Tons of companies enter the pay per click marketplace/platform on a daily basis. The truth is that most of the time, they have no idea how much money they should invest in their online campaigns and have absolutely no idea how to create a PPC budget strategy.
This can cause some of them to overspend and others to under-spend and in either case it’s a win for a professional agency because these companies will eventually get sick of losing money and start shopping around for an agency to help them.
I’ve listed a few points below that should help you if your a newbie PPC marketer to better figure out your budget and what you should be doing.
Will your campaign be targeted worldwide, nationally or just locally? Depending on what kind of reach you want will affect your budget. It may not seem important but setting the wrong geo-targeting will blow up your campaign and not in a good way!
This may seem obvious but a campaign that has 20,000 keywords is going to need a bigger budget than one that has 100-400. Make sure you adjust accordingly.
Initial Keyword Bidding
I recommend you always start out with a higher bid. This varies from different agencies but I’d rather bid to high and get a great quality score than bid to low and get a crappy quality score which will just end up affecting other aspects of my campaign negatively. At least a high bid you can always run it, gather some data and bring it down without killing your QS.
Tracking Conversions & CPL
You need to determine what a lead is worth to your business. So you have a target CPL (cost per lead) that you can go after. Let’s say you are a plumber and each job you do you profit $1,000. It takes you 4 leads to land 1 job. So depending on what your sales goal is as a company, lets say for now its 4 sales a week, optimally you need to generate 16 leads a week in order to hit your sales goal of $4,000 per week in revenue.
Let’s do some math! Your conversion rate is 1 out of 4 which equals 25% conversion rate. The LTV (lifetime value) of your customer is $1,000. Let’s say your desired ROI is 100%. Therefore your targeted CPL (cost per lead) should be $125. So assuming you want a 100% ROI on your marketing spend, you can pay up to $125 in order to hit your sales goals. Cool free tool to calculate this for you here: http://promotion.jellop.com/target-cpl-calculator/