Pay-Per-Click has a vast presence in Search Engine Marketing. It is estimated that businesses spend approximately $106.5 Billion on numerous advertisement platforms. Google AdWords formerly known as Google AdWords is the leader as PPC platform. At the time of writing, the overall market share of Google AdWords is more than 73%.
Facebook and Bing follow next in line after Google. They also have a massive market share compared to other platforms. As the availability of PPC platforms is vast, there are a wide array of strategies to aid advertisers and marketers get the most out of the marketing efforts. Different PPC platforms require different strategies and approaches for a successful campaign.
What is PPC Bidding?
Pay-Per-Click bidding is the most common process used by advertisers in Google AdWords. Advertisers place bids in PPC auctions to secure ad placement among the top search results. Businesses who want to have an online presence and drive traffic via PPC place their bids on certain keywords. Advertisers and businesses secure the keywords which are relevant to getting traffic for their websites.
In a successful PPC campaign, bids play a crucial role while placing ads. Google AdWords asks several questions during the beginning of a PPC advertising campaign. Google asks the amount you’re willing to spend every time an ad is clicked. However, the advertisers don’t have any means to know if the bid is higher or lower for the similar targeted keywords.
How do you calculate PPC?
Advertisers should always calculate PPC for their campaign. PPC costs usually vary from one industry to another, and this makes campaigns of all companies different from each other. Calculating the Pay-Per-Click advertising budget is important to minimize the costs and reckless spending than it is needed.
People who are new to PPC have to understand the fundamental difference of customers’ lifetime value and initial transaction that comes with the ads. Initially, your ad might be able to generate a transaction of $5. If your ad has Customer’s Lifetime Value as $5,000 then paying $1 for a single click is justified. Let’s dig deeper into the PPC budget.
1. Describe the goals of business and advertising
If you want to calculate a budget then, you should know what you’re advertising. There is a smart way that advertisers can partake in calculating PPC budget accurately.
Let us introduce you to a methodology which works, SMART goal-setting. Your goals should be:
Normally companies only have a few goals which they need to achieve via PPC advertising, such as:
- Brand Awareness
- Customer Acquisition or Lead Generation
- Customer Retention
If your goals are properly compartmentalized, they will yield better results.
2. Understand the traffic requirement
As an advertiser, you need to understand the traffic that businesses need to grow. You need to have an utterly realistic conversion figure which is achievable in two weeks. Keep tabs on the historical data of Google Analytics.
When you run PPC campaigns, you can keep tabs on the conversion rate to understand traffic better. Upon finding the conversion rates, use the formula mentioned below to calculate traffic:
Potential Customers/Rate of Conversion
If you need 200 new customers then your conversion rate lies between 6% and 8%. Hence the calculation would look like:
Traffic Needed = 200 customers/6% = 3300 clicks
Traffic Needed = 200 customers/8% = 2500 clicks
So, you need around 2,500 to 3,000 clicks to drive new customers to the business.
3. Get an Estimated Cost per Click
Once you’re aware of the total clicks you need for achieving the business’ goal, you have to calculate the CPC of each click. When it comes to CPC, you’ve three options:
- You can refer to historic data of the previous campaigns to get similar keywords. By far this is the best option for you
- You can make sure of Google Keyword Planner to accumulate Cost-Per-Click concerning location, target keywords, competition and volume
- You can also avail industry benchmarks to get the desired result
You will find the average CPC data if you search your Pay-Per-Click account. However, there is a catch, finding CPC data requires that you’ve run the same ads in the past.
How can you get CPC data from Google Keyword Planner?
1. Look for “Get Search Volume and Forecasts”
2. Enter the targeted keywords
3. Find the maximum as well as average CPC
4. Note down the data
The maximum CPC bid limit is the bid which you set for determining the amount that you’ll pay to get clicks on your ads.
If you set your maximum CPC to $2.5 then throughout your PPC campaign you won’t have to pay for over $2.5 for clicks. However, there are some instances where your maximum CPC might exceed such as:
- Search Partners
- Enhanced CPC
- Bid Adjustments
4. Calculating PPC Advertising Budget
The previous steps have already provided you with the variables you need while calculating the PPC budget, such as:
- Definite goals to convert potential customers into customers. The rate of conversion is important as you’d get a return on your investment.
- The average rate of conversion (6% and 8%)
- Clicks you require to drive customers into buying products and services (between 2,500 to 3,300)
- CPC- $2.5
These are the data you need for calculating the PPC budget. Avail the formula below to get overall PPC budget:
Traffic needed x Average CPC
Calculate CPC twice to have an estimative range (high/low) of the budget.
You might be thinking, what is a good PPC budget? It is very much obvious that as a budding advertiser, you want to know how much you are needed to spend on PPC.
Businesses need to pay an average of $1-$2/click to place advertisements on the search network of Google. Every month, businesses need to spend around $9,000 to $10,000 on an average on Pay-Per-Click. Setting a PPC budget has the benefit of its own.
What are the advantages of setting your PPC budget?
The following are the reasons why you want to set the PPC budget:
- You can bring your brand from the darkest pits and place it right in front of your customers.
- Tracking PPC campaigns gets easy if you set the PPC budget before moving forward with the strategies. They also offer complete transparency.
- You only have to make the payment when visitors click on your ad(s).
- You are in control of what goes in and out of the PPC campaign.
- PPC increases sales alongside traffic on the website, do you still think you shouldn’t set the PPC budget right before the strategies are worked out?
- You can remarket your ads and get the customers on board who you missed out in the first place.
- Even if you want to grow strong organically on the internet, PPC won’t come in your way.
So, how much does it cost to bid on Google AdWords?
You are already aware that some keywords come with a hefty price as compared to others. Bidding on Google AdWords also depends on how competitive your niche is. You have to consider these examples before kickstarting PPC campaigns.
Statistics suggest that the average CPC in Google AdWords lies somewhere between $1 and $2.
What are the types of bidding strategies?
With Google, you can either bid in automate or manual. Let’s take a look at bidding strategies that Google provides to the advertisers in 2020:
- Manual CPC
- Automatic CPC
- Enhanced CPC
- CPA Bidding
- CPM Bidding
- Flexible Bids
Note that all strategies are robust and they are curated to suit your business and industry. Your campaign will always be on the safe side if you garner enough data from your bidding strategy. Further, run benchmark performance in Google AdWords.
Take A Look At The Below PPC Advertising’s Other Chapters
Chapter 2: All About Developing Your PPC Strategy
Chapter 3: Quality Score & Its Impact on Google Ads
Chapter 5: Why Keywords Matter & How They Work in PPC
Chapter 10: The Complete Guide to Ad Extensions
Chapter 11: All Things to Know About PPC Ad Formats
Chapter 12: Top 10 PPC KPIs You Should Keep a Track Of