Google Ads has the power to help small businesses boost brand awareness, reach more customers and consistently measure performance. It’s a very effective option even if you’re operating on a tight budget. One of the questions we are most often asked is how much you should spend on Google Ads to get the results that you’re looking for. While there is no simple % answer to this there is a process you can go through to get a better idea of what an effective Google Ads budget should look like.
Testing is always the first stage
You might start out with a budget that launches the perfect campaign or you just might not hit the mark first time around. Testing is a key part of the process when it comes to establishing the budget that you’ll need for Google Ads. You can begin with the most basic formula - take the number of keywords you want to use initially and multiply this by the cost per click and by at least 100 clicks (100-200 clicks will establish whether a keyword is working). So, that could be 10 keywords with a cost per click of £1, starting with an initial budget of up to £2k.
Once your campaign is successful switch your mindset
If you’re starting to see a profitable campaign then it’s time to turn off the testing mindset. Switch to looking at the returns that you’re making on the investment and consider whether you want to continue pushing these to grow. If that’s the case then you may need to avoid a cap on the budget. After all, if you’re already generating profit from the budget that you’ve used so far it makes sense to continue to scale it up to increase this further.
An important metric to look at here is ROI. Focus more on increasing the return that you’re making on the investment, as opposed to simply managing costs. The more you invest into profitable advertising the better the returns will be e.g. dramatically increasing market share.
Earnings per click (EPC) vs. cost per click (CPC)
Although it’s important to work towards reducing CPC the real focus here should be on EPC. Why? Because a high EPC will enable you to outbid competitors and get more clicks and leads. You can establish your EPC with this simple equation: Customer Value X Conversion Rate. Your conversion rate is the percentage of those who click through and go on to convert.
The customer value is what you earn from a new customer, less their fulfilment costs. So, for example, if one customer generates £50 and you have a conversion rate of 2%, then your EPC is £1. If you focus on channelling your budget into increasing EPC then this will logically result in greater traffic and a higher market share.
Although there isn’t a single straight answer when it comes to how much budget for Google Ads is the right amount there is a simple formula for working this out.
Get started with Google Ads this year by speaking to one of our Google Ads specialists today.