“How much should I spend every month on Google AdWords?”. This is a typical question most digital agencies get asked during the meeting with the customer. There’s more that goes into the budget planning process than choosing a number like the budget for the campaign.
Here are a few things you may need to keep in mind and some tips on how to choose a budget that will work for your client, their industry, and their goals.
First of all, what is the average budget for B2B clients on Google Ads?
Budgets for Search Engine Marketing (SEM) campaigns will inevitably vary company by company depending on their financial health and end-campaign goals. However, understanding what the average company spends on advertising can still be helpful.
Digital advertising spent looks to reach $107 billion this year in the U.S., according to eMarketer, while TV ad spend continues to fall. (Are we still surprised by this in 2020?)
The biggest U.S. spenders came from the retail and automotive industries respectively.
In 2018, the average company was expected to allocate 42% of their marketing budget for digital marketing (SEO, Social Media, Content Marketing, Marketing Automation, etc), and this rate looks to grow to 45% by 2020! Ask yourself this question. Are you allocating 45% of your total budget on digital advertising? As agencies, we have to walk the talk. In fact, over at iClick Media, we have no qualms spending close to 80% of our budget purely on digital marketing. Our spending can range from Video Advertising, to Carousel posts on Facebook and etc.
Additionally, in a 2018 report from Hanapin Marketing, 62% of respondents said they planned to increase their Pay-Per-Click (PPC) budget in the next year. 78% of those surveyed specifically planned to increase their Google Ads budget (Isn’t this great news for digital agencies?!).
This makes sense when you consider that on average, businesses earn $3 for every $1.60 spent on Google Ads. However, there’s a catch: Depending on the industry you’re in, not all spending is the same. Even if every company had a Google Ads budget of $1 million, few would see the same ROI for their campaigns.
That’s because Google Ads work better for specific industries over others. Simple as that.
Software-as-a-service (SAAS) companies, for instance, tend to see higher ROI from their campaigns than traditional business services (Accountants, Printing, Pest Control).
This makes sense because a lot of Google Ads’ success depends on the selected keywords. For example, insurance companies may find added difficulties because “insurance” as a keyword is one of the most expensive. Finance industries may be in the same boat if they try to rank for keywords like “loan” or “mortgage.”
When it comes to ROI, it makes sense that a B2B company that wants to rank for the keyword “business services” might not see that much success. It’s considered highly competitive! Here’s a recent keyword research that we did for our client during the Circuit Breaker period. 1 of the keywords that the client wants to include as part of her Search Engine Marketing (SEM) campaign is a whopping $61.06 per click! This is certainly 1 of the most expensive Google Keywords ever! Naturally, we advised her against spending such exorbitant money on this keyword.
Additionally, understanding things such as keyword cost per click, industry spending habits and potential ROI can all help you keep things in perspective when setting your budget. That still leaves the ultimate question: How much should you be budgeting for your Google Ads campaigns?
Here are the three key questions you should ask yourself (or your client) when determining your spending:
- How do I set up a Google Ads budget?
- How much is the cost per click (CPC) for the keywords that your client wants?
- Which key performance indicators (KPIs) matters most to the company?
So how do I set up my Google Ads Budget?
Like other types of PPC advertising such as Facebook or Instagram, Google Ads work by placing bids. You’re not spending thousands of dollars on those bids at once (definitely not right?!). You typically will select a monthly budget for spending (Say $1,000 a month), which you can change based on the results you see over time.
The trouble with having to plan out an easily-changed monthly budget is that it can be tempting to adjust it continually as you track your metrics.
When it comes to budgeting, we’ve found it is better to do keyword research first, rather than set up a CPC cap. This helps to get an idea for what competitors are bidding on and how much it will cost to compete.
You’ll also learn which keywords are more valuable based on how many people are bidding and what their prices are; then shape your budget around that! You wouldn’t want to spend a single cent more than your competitors right? That’s only natural.
At iClick Media, we manage our clients’ daily budgets by taking a prioritization approach where the aim is to reduce the amount of Impression Share (IS) being lost to budget in our top performing campaigns. Once the top performing campaign isn’t losing impression share to budget, we allocate budget to the next best campaign and so on. This kind of approach to budget management ensures that the account is spending money in the best possible places.
What is your keyword’s Cost-per-Click (CPC)?
You will also want to determine your budget based on the success of your chosen keywords. For example, if you decide to use keywords that have high competition, you may not see as much ROI for your ad spending as you would for less competitive keywords.
The average CPC for any given keyword is calculated by a relatively simple formula: CPC = Total Costs / Total Clicks.
To give you some idea, the average CPC for the B2B industry is SGD$2.83. Take a look at the average cost per click for the various industries below.
While you do have control over the maximum CPC you pay for each keyword, you will always pay more for highly competitive keywords. Remember that this is a bidding market. The highest bidder wins!
There are a few strategies when choosing a budget for CPC:
- Do your detailed keyword research first and get an idea for what your competitors are bidding on and how much it will cost to compete.
- Set a budget limit and choose to bid on fewer keywords or run fewer ads.
- Determine which keywords you want and create your budget around their CPC.
If you have an idea of the budget you want to spend, you may be better off setting a cap for your CPC and choosing keywords in that range. On the other hand, if you know your budget is flexible, spend more time on keyword research. Then you can choose those with the best potential ROI and set your budget there at the start.
At the end of the day, which SEM metric matters?
Of course, the CPC isn’t everything. Other performance indicators will also affect your Google Ads budget. These important SEM metrics help you measure the performance of your ads over time, so you know whether or not campaigns are meeting your expectations.
Some important KPIs include:
- Impressions – Every time your ad is displayed it’s considered an “impression.”
- Click-through rates (CTR) – A CTR measures how often your ads are actually clicked.
- Conversion rates – This measures actions taken after someone has clicked your ad and landed on your site (did they fill out your form, etc.).
- Cost per conversion – This shows you the average amount of money you spend on PPC for every conversion earned.
- Average position – Average position is an indication of where your ads fall when they’re triggered and how much traffic each location receives.
- Quality score – Quality score is an expression of how reliable your company is at showing relevant content in your ads (low scores pay more).
While all of these KPI metrics are technically important, some may mean more to you and may be more helpful in determining your budget.
Unfortunately, there’s no specific formula on how to determine your paid search budget.
You should base your budget on many variables, such as your current marketing budget, your desired spending amount, your ultimate campaign goals, your chosen keywords, your CPC rates, and your KPI metrics to track progress.
The more time you can spend developing research keywords with better CPC in your industry and narrowing down your KPIs before you create your campaigns, the more successful they will be. Make sure you’re taking the time to watch your campaigns closely, especially if you’re using ECPC. This will allow you to see which campaigns are giving you the best ROI and which ones are wasting your money.
Let’s make your SEM campaign happen. Effectively. Always. Give us a call at 6362 0123 or book an appointment with our consultant to discuss more!