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Step-by-Step Guide to Calculating a Profitable Google Ads Budget

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Step-By-Step Guide to Calculating a Profitable G Ads Budget

Pay-per-click (PPC) campaigns are one of the most important advertising techniques in marketers’ tool belts. Calculating and determining a profitable Google Ads budget can be intimidating, but a well-planned budget is an essential player in the success of your PPC efforts.

You may have asked yourself more than once, “How much should I spend on PPC?” We’ve put together a step-by-step guide to show you exactly how to calculate your Google Ads budget.

How to Calculate Your Google Ads Budget: Setting Goals

Begin with the basics by defining your S.M.A.R.T. goals for your PPC efforts.

S.M.A.R.T. goals are:

  • Specific – Set real goals with actual numbers.
  • Measurable – Ensure that your goal can be tracked.
  • Attainable – Make it challenging but possible.
  • Realistic – Be honest with yourself about your capabilities.
  • Timely – Set a deadline.

These goals should answer questions like: How many new customers do you want to acquire each month? Can you sustain a large influx of new customers? Is there a certain amount you’re willing to pay for each customer? What’s the lifetime value of a customer for your business? Will your prices drop (retail) to the point where a conversion is worth more now than it’s worth in a couple of months?

These goals need to be carefully thought out and written by your entire team.

Common Goals for Google Ads

For each campaign you run, only one goal can be selected. This choice is important because the options for your campaign settings will change depending on the goal you select.

Increase Traffic

Newer companies are often looking to increase website traffic. This helps build brand awareness by getting your name in front of potential customers. An increase in traffic is a highly measurable goal and, therefore, a great place to start utilizing your Google Ads budget.

Not all campaigns are going to be focused directly on driving sales, but a goal to increase traffic can result in more sales down the road. When your PPC campaigns aren’t focused on driving sales, it’s a good idea to keep costs low by bidding on broader, less expensive keywords. We have more on this later.

To increase traffic, you can utilize high-converting ad copy, increase your quality score (more on this in the following section), and use ad extensions.

Drive Leads

Capturing leads is a common goal of PPC campaigns. The key here, though, is to measure the leads that land at your website and apply a strategy to turn those leads into sales. Always be sure that your landing page is in line with the keywords you’re targeting and ensure the CTA on your landing page drives customers deeper into your sales funnel. Without a sales strategy, those new leads aren’t going to be much help to your sales team or your company.

If your goal is to drive leads, it’s a good idea to keep an eye on your quality score. Google actually rewards advertisers with high quality scores by giving them a lower cost-per-click (CPC) and higher positions. To achieve a high quality score, ensure that you target keywords that are relevant to your ads.

Increase Brand Awareness

Display ads are a great way to get your company’s name to appear on different websites while keeping the cost of your Google Ads budget low. These ads will help get your name out there and result in heightened brand awareness.

A goal of increased brand awareness can result in more interactions, positive associations with your brand, improved brand loyalty, and brand engagement. A rise in overall website performance can be attributed to an increase in brand awareness.

Generate Revenue

Ultimately, all PPC campaigns lead to traffic, which leads to conversions, which lead to sales. PPC ads allow you to target specific audiences that already have an interest in buying your product, which is a huge advantage to your marketing efforts.

If generating revenue is a specific goal of your campaign, you’re going to see better results when bidding on keywords that are more relevant and higher priced. Trust me—if you need to drive sales, it’s a worthwhile investment. Keep in mind, it’s vital that you have a long-term strategy specific to your market and budget to see success.

How to Calculate Your Google Ads Budget: Term Selection

Term selection is one of the most critical parts of a Google Ads campaign, and it plays an influential role in the calculation of your Google Ads budget. Your budget may need to be very high or very low; it really depends on the terms you intend to target.

You may choose to target the term “digital marketing,” for example. This keyword is a highly searched term and, therefore, an expensive keyword to bid on. If you have a decent budget to pour into that term, your ad might show up at the top of the Google search results, providing visibility to thousands of users. But the trick to calculating your Google Ads budget is to minimize costs and avoid spending more than is necessary. If you’re selecting the right keywords, you’re sure to achieve a higher return on ad spend (ROAS).

Term Selection

Select Relevant Terms for Your Google Ads

When selecting terms for your campaign, be sure to only bid on terms that are extremely relevant to your business—this is known as ad relevance. The right keywords will attract customers, increase your click-through rate (CTR), and minimize advertising costs. According to Google, ad relevance measures how closely related your keyword is to your ads. If your ads are relevant, they will have increased visibility and, therefore, a higher ROI.

Here are a few tips to ensure your keywords are relevant:

  • Keywords should always match your ads.
  • Ads should always match your landing page.
  • Keywords, ads, and landing pages should always match search intent.

As you’ve learned, there are many variables involved in term selection. Let’s finally dive into search volume.

High Search Volume Trends

You want to be sure that the keywords you select have a high search volume. You can do this by researching search volume trends with tools like Google Search Console and Google Keyword Planner.

If you choose to target broad keywords with a search volume of over 100,000 monthly searches, you can get a lot of clicks. But, with a broad keyword, you have the potential to attract untargeted traffic.

Keywords with a smaller search volume might only result in 30 visits a month, but since the keyword is very specific to what you’re offering, these users are all interested in purchasing a product similar to yours and, therefore, more qualified.

You want a good balance of both high and low search volume terms, and you must be specific with your keyword selection. The keywords you select should match the behaviors of your target audience.

How to Calculate Your Google Ads Budget: Other Targeting

There are many different ways to target your Google ads, and depending on the targeting you go with, your Google Ads budget may be significantly affected.

Google Ads Location Targeting

Location targeting allows you to target your ads by geographic location. Often, location-based keywords can be high volume at a low cost per click. You can choose to target by country, areas within a country, the radius of a location, or location groups—these include places of interest, your business location, or tiered demographics.

Location Targeting

Location targeting allows you to target audiences in areas with the right customers. You can also restrict your targeting in the regions that you don’t want to advertise in.

If you are planning on running a location-based campaign, you should look into trends and breakdowns for the region, state, county, or city you want to target.

Google Ads Time of Day Targeting

You can also filter your targeting by the time of day your ads are shown. You may find that allocating a higher budget to your ads at certain times or on certain days will be more valuable to your business. If you believe it will not be profitable for your ads to be served during certain times of the day—between the hours of 5 p.m. and 8 a.m. on weekdays, for example—you can easily turn your ads off during that time.

Time of Day Targeting

Time of day targeting can work well for businesses with physical locations. It’s best to drive traffic during operational hours since this can help drive in-store traffic. Targeting by the time of day isn’t for every business, but if implemented and monitored correctly, it can be a very effective way to target your potential customers.

Google Ads Device Targeting

Another way you can target your advertisements is by the device your potential customer uses—including desktop, mobile, TV, and tablet. You can choose to turn targeting off for a specific device, or you can specify a budget for the campaign or ad group level.

Device Targeting

Targeting by device is helpful when you’re aware of how most customers search to find your business. If you have a mobile site, it’s a good idea to target mobile users with a separate campaign using your specific mobile site URL.

How to Calculate Your Google Ads Budget: Programs to Use

Many different programs can help you calculate a Google Ads budget tailored to your business.

Wordtracker Scout

Your competition can provide you with some of the most valuable insight on which keywords are best to target within your market in order to drive conversions. An effective program to use as a Google CPC estimator is the free chrome extension Wordtracker Scout. This digital tool takes a lot of the guesswork out of Google Ad campaign keyword planning by identifying which keywords your competitors are ranking for.

Google Keyword Planner

Another valuable program to help calculate your Google Ads budget is Google Keyword Planner. This program is highly intuitive and easy to navigate. It provides you with almost all of the data you need to select the right keywords for each campaign you run.

Google Keyword Planner is a great tool to utilize as a Google Ads cost estimator because it does most of the work for you. To get the estimates you need, the first step is to input the search term you may want to advertise for in the “products or services closely related to your business” field. You can also paste your landing page link into the “landing page” field, and it will automatically generate keyword ideas for you.

Keyword Planner

In addition to the keyword(s) you input, the results will aggregate other keywords Google thinks may work for your campaign based on what you provided.

For each keyword, you will get metrics based on the time range, location, and search network settings you selected. The average monthly searches show the average number of searches for that particular keyword. Competition shows how competitive the ad placement is for each keyword. The level of competition—low, medium, or high—is determined by the number of advertisers bidding on each keyword relative to all keywords across Google. There is also a high and low range for the top of page bid—these numbers depict what advertisers have historically paid, on average, for that keyword. It’s important to note that these ranges are not exact; your average CPC will vary.

How to Calculate Your Google Ads Budget: Profitability

Many companies want to know how much they need to spend on PPC to see results. The truth is, there isn’t one set Google Ads budget that will work for everyone. Doing research specific to your market is vital when calculating your budget for each campaign.

The best tip on how to handle your budget is to work backward. Know what your maximum monthly advertising budget is and allocate a portion of that to each campaign or ad group you’re running. Take into account the necessary period of testing and optimizing when launching a new campaign—more than likely, you won’t see instant results.

It’s important to note that it isn’t a good idea to start with an extremely low daily budget because Google will not be able to gather the data you need to optimize your campaign well. Once 100 clicks are reported for a keyword, there is typically enough data available to offer insight into how to improve the max CPC bid.

When running a PPC campaign, ROAS is always a primary key point of interest, as it calculates the profitability of your campaign. The formula for calculating ROAS is simple: divide the revenue generated by the amount spent on a campaign.

There are a few ways to improve ROAS for your campaign:

  • Lower the cost of ads and maintain the revenue.
  • Increase revenue while lowering the cost.
  • Increase revenue while keeping the cost stable.

The industry-standard benchmark for ROAS is 4:1, meaning that you generate $4 of revenue for every advertising dollar spent. To establish a solid ROAS, an expertly crafted Google Ads budget is vital to creating a PPC strategy that meets your business objectives.

When you have a good understanding of the profitability of your ads, it’s a good time to start thinking about your company’s client acquisition goals. You can establish your cost per acquisition (CPA) once the ads you’re running have started producing constant, predictable results. CPA is calculated by dividing total ad spend by total conversions. Once this number has stabilized, you will be able to determine how much you need to spend in order to produce a lead. Once you have the cost of acquiring a lead figured out, you can increase your budget and scale your ads based on your goals.

How to Calculate Your Google Ads Budget: Tracking

An essential factor in continually serving successful ads is tracking your conversions. To maximize the results of your campaigns and reach your goals, you must understand your customer’s journey and be able to measure your marketing impact throughout that journey.

Google provides many different solutions to track your Google Ads results. It’s crucial that you know which metric works best for your specific needs. Tracking shows you your ROI, which helps you make more informed decisions about your ad spend.

Conversion rate tracking (also called conversion tracking) shows you what happens after a customer interacts with your ads. To set up conversion tracking, you must create a conversion action in your Google Ads account. Conversion actions are actions users take that are considered to be valuable to your business. After a customer completes an action you’ve defined as a conversion action, it is tracked. This can be a product purchase, newsletter sign-up, call to your business, or app download.

Conversion rate tracking shows you which keywords, ads, and ad groups are best at driving valuable actions. When you’re able to view this data in reports, it will help you see clearly how your advertising efforts are helping your business achieve its goals.

Give Your PPC Efforts a Boost!

Doing the proper research in order to calculate your Google Ads budget may be time-consuming, but it’s worthwhile. As you have learned, calculating a profitable Google Ads budget is a lot more straightforward than it seems.

You now have the knowledge necessary to craft a Google Ads budget that is sure to drive your desired results. If you need more help with your PPC efforts, schedule a FREE consultation with one of our business results specialists.

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