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How To Calculate The Right PPC Budget For Your Business

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image source: Inramstechnology.com

Pay Per Click or PPC budget is a tricky one for a business as it requires planning and calculations just like any other advertising strategies yet it is something that may be considered to pull up the sales to a desirable platform where other means may be failing.

First, planning is required to determine the aim you wish to achieve with this budget. The main aim is acquiring a desired or estimated number of customers while paying not beyond a specific limit within a set time period. Therefore, the objective is something that is specific, can be measured and achieved, relevant and also time bound.

To determine the budget, certain formulae can be used to determine possible conversions of prospective customers and accordingly a budget can be set. But it’s not that easy. You will also be required to determine competitor’s activities with regard to paid advertising strategies, researching on appropriate keywords and also cost per customer.

How to determine lead generation?

Let’s first consider the formulae available to decide upon lead generation.

  • (Revenue / Sales Period) / Average Sale = Number of Customers
  • Number of customers / Conversion Rate = Number of leads
  • Number of leads / Conversion Rate on Traffic = Amount of Traffic

If we fill the equations with some real numbers, we will arrive at a possible lead generation value through which we can determine if the PPC budget is worth considering or not. If it’s worth it then, we go to the next step that is to analyze competitor activities.

Analyzing competitor activities

Analyzing the Google AdWords of competitors is the next step which can be achieved using software like SpyFu and Moz Pro. These can give you lot of details about expenditure, keywords that are targeted and advertisements. Accordingly, a rough estimate can be drawn to guess the budget of competitors. However, that’s not enough as it’s the keywords that determine the volume of traffic and also the cost effectiveness.

Understanding Keywords Research

In order to determine which keywords will fetch more bulk of traffic with less expenditure, a sound keyword research is required. Google AdWords is a free tool which will help to determine the most used keywords. Using the following formula we can determine a rough estimate of annual traffic:-

Monthly keyword searches X Click-Through Rate = Estimated Monthly Traffic X 12 =Estimated Annual Traffic

Based on results, you can determine the budget either by increasing keywords to achieve the business objective or whether the leads which pour in through other advertising means like social media, SEO and email should be increased.

Determining a PPC budget is challenging in the sense that lot of assumptions and pre-conditions have to be decided based on various factors like previous experience and research of variables and doing the calculations to reach a plausible amount of expenditure. The main aim is to fill up possible gaps present in rest of the advertising strategies while remaining within expenditure limit.