How to set a PPC Budget

When I first meet with a client to discuss Pay Per Click, after all the excitement is over I have to have the conversation of how much, it generally goes like this:

Me: What kind of budget do you have?

Clients: Well how much do you think we should spend?

Me: You can spend as much or as little as you want, how much does your average sale cost you at the moment?


Generally at this point the looks a little dumbfounded and either hasn’t got a clue or gets them all through networking so insists the leads are free.

Pay Per Click Expectations

Then there is the expectation, I remember working with a solicitors a few years back and we carried out a local PPC campaign for them, their budget however was set at 1,000 a month. After the first month they were already talking about halting the campaign, they get 15 conversions, of which they converted 4 into sales (and there were a couple outstanding). They hadn’t expected leads through Pay Per Click to cost so much, after all Google is free.

From this point on I have always told a client how much a lead could cost – in some sectors you may be looking at pounds, in most sectors you will be looking at tens of pounds, in competitive sectors, such as debt management, solicitors, no win no fee etc you could get t0 over a hundred pounds per lead.

The cost of the lead doesn’t really matter, what matters is how many qualified leads it takes to make a sale and from that how much each sale is worth to the business in profit. If it takes 5 conversions to lead to a sale of a product or service that costs 100, but the leads cost 30 it’s not worth it, you can try to drill down a bit more with the keywords however you’ll find then that the client isn’t happy about the volume of leads.

Volume of leads through Pay Per Click

First of all remember that not everyone regularly uses the sponsored ads links, so you’re not going to get the full volume of clicks that you would if you had a position 1 organic ranking. Secondly,  as with everything search, the volume is in the searches, not in the results, ie if there is not very many searches being carried out no matter how much you reorganise a page to make it a better landing page you aren’t going to get proportionately more conversions. The answer in this situation is to break out the AdGroups further with new keywords.

All of this does however cost more money, it costs more money in the short and long term, in the short term you have the try and see approach of marketing were you have to dip your toe in and see what happens, normally you will find a niche that works well, however you will then find that other people start bidding on this niche and your costs go up, at some point the client will come back and say woah! we’re spending a bit too much for the leads now, or it’s too competitive we are missing the leads because as soon as they come to us they complete our form and are off to another competing site to fill in their form. It’s time to find a new niche, so we’re back at phase 1.

PPC as Lead Generation vs Advertising Model

Back in the olden days people didn’t really care about the return on their marketing spend, at least not in the same way they do now. When I started marketing way back when there was an acceptance that it was a bonus if something got a return on investment, that was always the goal of course, but if it didn’t happen at least the product had been advertised, that’d because marketing back then was so much less traceable – we didn’t know how a marketing campaign was affecting purchasing habits. Now we know for a fact where people come from, how they found us, how they contacted us and brand marketing has given way to bottom line marketing.

I think this is a bit short sighted and in time we’ll find a brand marketing approach start to reappear, especially for the small fry.

Setting the budget

That all being saidm you have to be able to go back to the client with an idea about how much they should spend and hopefully an idea about what they’ll get back for their money.

There are loads of bits of software that give you a rough idea about how much people are paying for clicks. From that I tend to work by this model:

10% of impressions will click through to the site

3 – 5 % of click throughs will go on to convert

That’s not a hard and fast rule, but it will give you an idea about how much your marketing with PPC should cost – each market sector is different so you need to reassess this regularly and let the client know where things are up to.

As with everything internet marketing – good communication is the key.

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