What is the Ideal Amount I Should Spend Per Month on PPC Advertising

Paid Search, like Google Ads and Facebook Ads are important for businesses of all sizes. If you’re thinking about running a campaign as part of your digital marketing strategy, the first question that comes to mind is usually about how much your business should spend per month on PPC (pay per click) ads.

Spoiler Alert: Whatever it takes.

Really though, how much money should you spend on pay per click ads? Let’s take a look at how much businesses should invest in PPC to get the best return every month.

PPC On the Mind

A typical scenario looks like this: A client hears about pay per click and is curious how profitable it can be for their business and if it can build brand awareness. Like many, they have a long list of questions about the process, costs and when they will start seeing results.

As an experienced digital marketing agency in this space, we have worked with small and large organizations throughout many different industries. And we’re often asked the same questions. We understand that it can be challenging to find the right answers to all your questions, so you’ve come to the right place.

The number one question we hear from clients about pay per click is: How much should I spend per month on PPC advertising?

How Much Should I Spend Per Month on PPC Ads?

Businesses can spend as little as $50 per month on PPC…upwards of $5,000 and beyond. How much you spend every month strongly depends on your goals, how big of a geographic location you’re targeting, competitiveness of your industry, and keyword search volume.

But, like most things, this is not a straightforward question to answer because it heavily relies on your unique situation (industry, competition, budget, etc.). In PPC, most of the time your focus is more centered around finding the ideal CPA (Cost Per Action or Acquisition), versus maximizing clicks.

Clicks COST you money. Actions MAKE you money.

The target CPA depends on your industry and product/service, as well as the company’s individual goals. For example, are you promoting one-time purchases or looking for lifetime value of customers?

Ultimately, CPA in PPC depends on many factors (both PPC-campaign related and not).

This includes:

• Ad copy
• Scheduling
• Landing page (design and copy)
• Customer service
• Website
• Type of action
• Industry

Determining an acceptable threshold for your CPA is subjective, dependent upon several variables:

• Type of action (signing up for newsletter vs. making a purchase)
• Cost of product or service
• Single purchase or lifetime customer acquisition
• Converting ‘actions’ to ‘sales’

Advertisers must factor in the lifetime value of their customers acquired through PPC and calculate an acceptable amount to spend to gain their business (CPA).

In equation form, the calculation looks a little something like this:
CPA on a PPC Campaign =

(Cost per click / % Becoming Leads) /% Convert to Customers

At a minimum, PPC campaigns should be targeting a CPA of ⅓ (or less) lifetime value of a customer in order to ensure profitability.

Lifetime Value of Customer =

Average Monthly Revenue per Customer / Average Months of Service
Or
Average Order Value X # Repeat Sales X # Months Average Retention

It’s important to note that if you’re working with a limited budget, consider starting your campaign with a tighter geography. For example, instead of running a national PPC campaign right away, run in limited geographies for a few months. This will allow you to get some data, learn which keyphrases are working the best, and refine your campaign. After that, then roll the campaign out nationally.

Does all of this sound complicated? And why does it matter?

Look, PPC advertising isn’t easy. Not only is it time consuming—it can be downright confusing. With so much data and so many metrics to analyze, many business owners misunderstand reports and end up going in circles. It’s a tricky beast to navigate.

That’s why we’re here. We’re good at data. And we’re even better at results.

And, don’t worry. We’re not done here. Our goal is to answer some common questions about PPC spend and help you get started with a few tips and tricks.

First Consider the Quality Score

The most fundamental part of a successful PPC strategy is the Quality Score. What is a quality score? We’re glad you asked.

A Quality Score (QS) is the measurement of how useful and relevant your PPC ad will be to the user. The score (1-10) considers historical CTR, ad content, and the landing page. Scores from 6-10 lower cost of ad click. Scores from 1-4 raise cost of an ad click. Generally campaigns aim for a 7-9 QS to be successful. Every time a search is run, the network reevaluates the score.

 

Components of Successful PPC Campaign

Creating a closely aligned campaign offers the most chance for success, at the lowest cost per month. This means using keywords in ads and linking to tightly focused landing pages. The more seamless the process, the higher the ad network will value your campaign, lowering overall costs and increasing exposure.

Let’s look at three main components of a PPC campaign: Keywords, Ad Content, and Landing Pages.

Keywords
What kind of search terms are potential customers using when searching for your product or service? When building a keyword list, start with high-intent keywords and then experiment with low-intent keywords.

Consider the following:

• Four main types of keywords include: Branded, Competitor, Low Intent, High Intent.
• Vague terms (“computers”) will have a lower cost (lower bid, lower QS, lower conversion rate).
• More action oriented terms (“buy new computer”) will have a higher value (higher bid, higher QS, higher conversion rate).

Ads
Thorough research is one of the most important factors before running a PPC campaign. A few key reminders to keep in mind:

• Ads should be tightly focused on keywords, attention-getting, and relevant.
• They should drive conversion through a specific call to action: Download, Save, Join, Get, etc.
• And be sure to utilize all features, including dynamic content, extensions, mobile options, variable pricing, call outs, etc.

Landing Page
Having a compelling PPC ad with dominant keywords is meaningless if you don’t have a strong landing page. A successful landing page goes beyond a visually appealing design (although that helps, too); it requires continuous attention to data and A/B testing. Here are some best practices to consider when creating landing pages for PPC campaigns:

• Always link to a landing page explicitly about keyword/ad copy (not to the homepage).
• The closer the keyword is linked to the landing page, the better the ad network will rank Quality Score.
• Landing pages should be simple and direct, focused on driving the conversion through copy and design (lowers CPA).

When Will I See Results from Pay Per Click?

It’s important to note that not every product or service will benefit from a PPC campaign. Some campaigns will see immediate results, but generally, a minimum of 60 days is necessary to test a campaign. Less than this amount of time does not allow sufficient optimizations, scheduling changes, re-targeting, or other fine-tuning.

A good rule of thumb is to give your PPC campaign three to four months to allow time for analyzing data and making adjustments.

What is the Budget for PPC?

So, how much money should your business be spending on pay per click?

The amount of time required will also depend on budget – lower spending campaigns may require longer time, higher spending campaigns may need less. Under-funding PPC campaigns are one of the biggest mistakes that we see clients make. Without enough spend, not enough data can be collected to optimize an account. Campaigns need at least 500 visitors to have a large enough sample size to determine if it is working.

For example, if a conversion rate is 2.5%, and a company has a 30% close rate on leads, they are only talking 3.75 new customers. If the company stops advertising at the first 100 clicks, they may not see a single new customer.

And sometimes it only takes one.

Consider an industry like Engineering with a low PPC competition. CPC’s are generally cheap which means ROI for most jobs is extremely high. Obtaining just one lead at a relatively low CPC can bring in a huge profit. The HVAC industry, on the other hand, has high search volume and therefore can be extremely competitive based on geographic location.

Does the Landing Page Convert?

If you are not seeing above a 1% conversion rate after 500 clicks, you may need to rethink the PPC campaign. The problem could be with targeting, budgeted CPC, or with the landing page.

For example, if you have a decent number of clicks, but they are not converting once they hit the website, the problem likely is in the landing page which will need to be fixed before the PPC campaign can be successful.

PPC Pro Tips

Successful PPC campaigns are generally rated on one thing: generating conversions, or actions specified by the advertiser. This can be a purchase, filling out a form, downloading something, etc.

Alternatively, some companies use branded terms for their PPC campaign. With a more complex focus on conversions and exposure, branded terms have less competition, are less expensive, and are easier to achieve a Quality Score of 10. In other words: branded paid search terms help you get high quality scores fast.

The better the quality score, the cheaper the conversions.

Branding efforts include blog posts, videos, downloadables, newsletters, special promotions, tutorials, etc. And one of the biggest benefits of a branded PPC campaign is that it prevents your competition from targeting your customers (and ruining your reputation).

Did that get your attention?

For Branded PPC campaigns, consider bidding on a variety of branded terms such as your company name, your URL, and specific product or services. Promote what’s new, seasonal or least popular to drive traffic or generate interest for your current focus. You can also generate awareness for sister-brands or related products by highlighting both options.

The options are endless.

Experience Matters. Results Matter More.

At CMDS, our team is stacked with experience in pay per click management, digital marketing analytics, and SEO. We have proven success within a wide range of industries such as:

• Biotechnology– Upon implementing a highly-targeted strategy, we successfully grew a client’s baseline revenue while reducing cost-per-lead by 88% YOY.
• Entertainment– We increased phone call conversions by 143% over 30 days after implementing and testing different optimization tactics.
• Financial Services– We implemented a laser-focused keyword strategy for a local financial solutions client who saw an abundance of leads generated over their time spent with us. The quality traffic we drove to their website produced an above average conversion rate leading to an overall increase in ROI.
• Flooring– We increased conversions for a local flooring contractor by 40% year over year.
• Lawyer– We increased leads by 257% for a local lawyer Y.O.Y. through various optimizations implemented.
• Pharmaceutical- We have experience driving results for pharmaceutical clients nationwide.
• Real Estate– By targeting users who are actively researching listings in the area and then remarketing to them, we’ve seen an overall uplift in conversions by targeting them the second time around.
• Restaurant– The restaurant industry is competitive, but we’ve generated extremely low cost per conversions in previous campaigns regardless of this fact. Not only have we built brand loyalty, we’ve also generated an influx of leads month-over-month for our clients.

Professional PPC Management and More

Still not sure if PPC fits into your marketing budget? For more help on creating fully customized and scalable ads, and managing your PPC efforts, trust in the experts at CMDS. We’ll help you take it to the next level.

Call us at 732.706.5555 to get the conversation started!