For many companies, they ignore the important step of establishing a budget for their PPC strategy. Some companies think that as long as they’re making money, all is good, so we’ll just spend, spend, spend. But budgeting is the real key to a successful PPC campaign.
So why, as long as a company is hitting or exceeding their goals, should they have a PPC budget in place? Here are some good reasons to implement a PPC budget. Your business can:
- Effectively manage your PPC campaign
- Define realistic expectations
- Determine what works and doesn’t for future reference
- Re-allocate and re-invest budgeting dollars into areas that worked well
- Pull back budgeting dollars in areas that didn’t work
- Find out seasonal peaks and valleys
- Find out monthly peaks and valleys
Before you determine your budget, make sure you completely understand your current sales cycles and the reporting capabilities of your new PPC campaign. Don’t think you can get results immediately. At a minimum you should put aside enough budget dollars to bring in traffic for at least 3 months. It will take at least that long to see and realize results. Anything less and you’ll be shortchanging your efforts before they have time to gain momentum.
If You Can’t Measure It You Can’t Manage It
When you have a period when you’re not hitting your goals, previous budgeting and tracking will provide you with important historical data that can help improve future campaigns and get your sales numbers back on track. Once you learn to measure results you’ll be able to manage your budget and improve PPC results. These are the types of information you should be measuring:
- Spend Amount
- Revenue Gained
- Spend Efficiency (Spend / Revenue)
- Conversions
- Cost per Conversion
- Return On Investment (Including management fees and margins)
- Average Order Value
In order to measure results, you need to make sure you have all codes and tracking in place (in your ads and on the landing pages on your website) before you start so you can verify the true ROI.
Historical Performance Data By Time Period
When you’ve verified the true ROI and the above information by month, you can begin to create historical data and performance. This information will tell you when and where to concentrate future budget allocations, including when to:
- Participate in new platforms.
- Engage in more aggressive bidding.
- Where to concentrate efforts.
- Increase monthly budgets. This is especially important for e-commerce retailers to known which months/seasons of the year are the busiest. For example, if you are an e-commerce retailer you’ll want to spend more PPC dollars during Q4 and less during the slow months. Example: If you are a seasonal business and sell outdoor lawn furniture, you’ll lower your PPC dollars during the winter and increase them in the spring and summer.
- Where to Reinvest. Once you’ve found a positive ROI, continue investing your budget dollars right where you’ve experienced success until you don’t. When that happens, it’s time to find another segment to explore and start back at the beginning.
Of course this data is different for every business, but the important point is it gets you to think about your overall PPC strategy.
Crafting a New PPC Budget for 2015
As 2015 approaches, review all aspects of your PPC program, including monthly figures for: Spend Amount, Revenue Gained, Spend Efficiency (Spend / Revenue), Conversions, Cost per Conversion, Return On Investment (Including management fees and margins) and Average Order Value.
Once you’ve used the metrics, analytics and historical data to create a new budget for 2015, make sure to stick to it. Of course, unexpected issues will come up that may alter the plan, but it’s important to remember that the purpose of the budget is to drive your predefined goal (usually some upward percentage of yearly revenue growth).