Budget Management

Digital Marketing - Study Notes:

Manage your advertising budget

In order to manage your advertising budget, you need to consider three elements:

• Daily spend: If we look at our daily spend, ultimately what we pay on a campaign level each day to serve those ads.
• Max CPC: This is what we’re willing to pay for a click
• Time: Considerations such as time of day, day of week, and different factors can affect whether we spend more or less.

Managing your advertising budget should be the first major consideration for delivering your business objectives. It is your investment into the advertising. It is what you want to see the ROI on. And, as PPC is very much a conversion channel, try not to think of it as a budget spend, but actually a commercial return.

When you measure over time – your ecommerce metrics, for example – you might find that for every €100 of media spend, you get €1,200 worth of revenue. Therefore, for every €1,000 invested in Google Ads, you get €1,200 worth of revenue. So we see it as an investment piece rather than a marketing piece. And if you think about it in commercial terms relating to your business objective, when you’re doing PPC, you’ll find it much easier to reduce inefficiencies in your account, because an efficiency in spend doesn’t give you the commercial return you want. It’s “I’m investing, and do I get the investment back to what I expect?” And anything that doesn’t drive that investment, you need to kind of reduce the visibility or cut that out altogether.

So, knowing how much you want to spend on PPC is directly linked to knowing how much you want to make from that spend. So if you want to make €1,200 and you know that you need to invest €1,000 to do that, that’s your budget. It’s actually that straightforward. Now, it does take a little bit of time to work out these metrics. You build it up and you start small, but then over time you will see that the investment does equate to revenue return, and that’s more how a commercial PPC manager would look at it. We are constrained by our allowable budgets. So we must ensure that we’re only investing in the areas that do drive that return, and so we don’t go over our allowable budget with any inefficiency or something like that, because you know that certainly just leads to difficulties with stakeholders. And managing your budgets is an effective way to keep the investment strategy on course.

Daily spend

Now, Google Ads offers different ways for you to manage your budget, such as your daily spend, which is what you want to spend on a campaign, and you can control this. Bear in mind that daily spend can go over by up to 20%, and if there’s a lot of click-traffic Google Ads will just open it up for you just so you can get that traffic.

However, it is equalized out over the course of the month. Even though you might have had a click spike on one particular day and gone over your daily spend, by the end of the month Google Ads will have worked out what you should have spent based on that average daily spend.

Max CPC

The next is your maximum cost per click, and this is the price you’re willing to pay for a click. This is at an ad group or a keyword level. The equation is important: the sum of all your clicks multiplied by your CPC is how much you’ve spent. It sounds quite simple. That is the fundamental of pricing in paid search advertising.

Time

You can schedule your ads only to run on certain days or only at times when you know that it’s peak conversion time and you won’t be spending at times when there’s not. So, you can have a limited incremental reduction in how much you spend and the efficiency of your account by building in an ad schedule to your campaign.

Manage daily spend

Each campaign has a daily spend, and by structuring your account correctly by search volume or by type of keyword, conversion keyword, awareness keywords, you can manage effectively how much you want to spend each day, and that will translate into that investment return and within the context of your overall marketing budget.

Best practices

Putting keywords with similar search volumes allows you to control how much the high traffic keywords will spend versus how much the low traffic keywords will spend. Grouping keywords together by what they do, whether they’re awareness or whether a conversion, allows you to invest in higher ROI.

Give more budget to closing high ROI keywords. So these are the keywords that lead to the sale, and maybe smaller budgets for the top performer, and awareness drive and so on. So when you structure your account efficiently, daily spend becomes quite straightforward, and the bid management strategies around how to drive the best performance become quite clear. You’re able to start choosing away from maybe the standard, optimized for conversions towards things like a target CPA, which is a target cost per acquisition, or other -driven and bid management options available to you within Google Ads. But it all starts from that structure.

Use budget trackers

To ensure you don’t actually go over your spend, using things like a budget tracker is quite useful.

You can use a table, using Excel or another tool, to show your total budget, how much you’ve spent, and how much is left. And simply by tracking that on a day-by-day, or weekly basis or whatever your frequency is, you can ensure that you don’t go over spend. Because when you start reaching or overspending you can pull back. Or if you’re partway through the month and you see that you have only 10% of your budget left, you may have to make some changes around how much you’re spending in the different campaigns. And knowing how the campaign is structured, seeing that maybe we should just reduce spend on high volume keywords for the awareness driving keywords, or consideration keywords so we can start deciding where we want to move our budget from if we’re getting close to our spend.

Tracking your budget is essential because it’s paid search. So you’re paying for it and you do have more than likely a limited budget to what you can work on within a monthly, quarterly, or yearly basis.

Forecast to estimate performance

Using the metrics available to us we can forecast using whether it’s impressions and clicks to understand our CTR. There’s different formula for understanding how much you might need to spend in order to drive a certain amount of traffic. In this example, our cost per click is €1.50. We need to drive 1,000 clicks to hit our KPI based on our conversion rate. So therefore, in order for us to drive 1,000 clicks at €1.50 per click, we need to spend €1,500.

So, you’re able to forecast out how much you need to spend based on the traffic that you need, which ultimately has a conversion rate, which ultimately leads into your conversion.

The conversion rate is the most important metric for any kind of commercial activity. We have a goal to drive a certain number of sales. We will know that based on our current conversion rate we need to drive this amount of traffic at our current conversion rate to hit our sales KPI. This traffic is €1.50 per click, so we multiply that by the traffic required, and that gives us our required budget, and that’s how you forecast.