PPC Budget Strategy 101

Please Note: There is now an updated version of this article: PPC budget strategy: Tips for success on a limited budget

There are 99 ways to get more business from your PPC campaigns; budget is just one of them. Often the conversation surrounding budget is simple: “increase it!” Not bad advice, but often it’s not possible or the next best move we could make.

Today we’re simplifying the components of driving more business, and how we can control those pieces to maximize impact in order to get more leads for the same spend.

Driving More Business 101: More Budget or Paying Less Per Customer

As marketers we’re tasked to drive more business, commonly in the form of sales or leads. When building marketing plans for our bosses or clients, the formula is simple.

From a high-level budget perspective, there are two main ways to accomplish this:

1. Increase your budget
2. Lower cost per action, your CPA

Mind-blowing analysis, I know. Important nonetheless. If budgets are fixed it means we have only one option: be more cost-effective.

Quick Win: Allocation

One of the simplest to improve performance is to allocate budget differently. Rank your campaigns by CPA performing and develop a checklist to make sure they’re running at top performance.

Here are two simple wins:

1. Shift more budget to campaigns with lowest CPAs, Make sure there is no budget pause here.
2. Check for editorial issues and draft status in all campaigns, but especially high performers!

Cost Per Action Is Driven by CPCs and Conversion Rate

Since we already know you can’t increase your budget – let’s take a closer look at CPA. What can we do to affect your CPA?

But based on another concept, called Break-Even CPC, we know what drives CPA: cost per click (CPC) and conversion rate (CVR).

To drive more business, we need to lower our CPA, so we need to focus on driving down our CPCs or improving conversion rate. Now, we can refine our high-level budget strategy a bit more:

1. Increase budget
2. Lower cost per action, your CPA
   • Allocate more budget to best performing campaigns
   • Increase your conversion rate (provided your CPC increases at a slower rate than CVR)
   • Decrease your cost per click (provided your CVR increases at a slower rate than CPC)

Improve CPC And CVR to Get a Lower CPA

Now the real work begins. You’ve already identified your top-performing and worst-performing campaigns – now it’s time to squeeze them for every dollar.

Ways to eliminate waste and fix a low CVR:

1. Exclude poor performing keywords, placements and audiences:
   • In search pull a search term report and add negatives keywords
   • For RLSAs exclude audiences with -100 percent incremental bid
   • Check mobile performance, if poor consider negative incremental bid
2. Get serious about test landing pages:
   • Great tools like Optimizely, Unbounce, and others make testing easier than ever
3. Improve targeting. Pull multiple dimensions reports by geography, device, search network, time of day, day of week, and find segments that are not working. Get less with lower bids, get more with increase bids, or consider excluding them.

Ways to lower a high CPC:

1. Lower your bids to your break-even CPC, especially for top 10 percent of keywords or placements
2. Improve your click-through rate with better ad copy for all ad groups with break-even CPCs
   • Use all ad extensions possible
   • Pause poor-performing ads, test new ones using tools like Boost Media or Adalysis

This is not a comprehensive list, but gives you an idea of how to approach driving more business.

Eventually, fulfillment and channel cross-over becomes an issue, but those are more advanced discussions for another time.

Bringing It All Together

In the end, maximizing your budget comes down to the things you can control – and that’s your cost-per-click and your conversion rate. Put those factors front and center and you can be confident that you’re squeezing every penny from your budget.