How To Calculate PPC Budget For Your Next Campaign

When running any PPC campaign across Google Ads, Amazon, or social platforms, the allocation of the PPC budget is crucial for ensuring its success and effectiveness.

Analysing market trends and metrics allows you to make informed, data-driven decisions on where to funnel PPC budget to maximise the overall visibility and ad performance.

In this article, we’ll look at how to calculate your PPC budget, set realistic goals, analyse impact, and allocate funds effectively for maximum ROI.

Understanding the Components of a PPC Budget

A PPC budget doesn’t just refer to the spend on the campaign itself. There are multiple factors and other investments a business makes that all become part of the overall spend. These include:

• Ad spend: This can vary dramatically depending on your industry, keywords, audience and goals.
• Management fees: Are you paying any agencies or freelancers to handle the campaigns for you?
• Keyword research tools: Knowing which keywords to target is essential, but keyword tools like SEMrush are costly, so it’s important you remember to include them in your budget.
• Creative services: Are you paying designers or copywriters to create your ad content? Any additional costs, like stock photo services or apps like Canva Pro, should be accounted for.

From there, it’s easier to work out the overall PPC budget percentage split. Calculating the cost of services like keyword research tools is fairly easy, so the appropriate amount of budget can be set aside in advance. But when it comes to determining your ad spend, multiple considerations should affect its budget allocation.

The target audience and business niche both change the amount of PPC budget required. Certain audience segments and highly competitive industries may require larger budgets to maintain visibility; whereas smaller niches can have a lower spend and still achieve the same results. Make sure to take into account the general market saturation in your industry and any seasonal trends that could affect budgeting.

For example, a B2B SaaS company might lower their overall ad spend during Easter and Christmas time, when decision-makers are less available.

Likewise, consider your PPC budget in relation to your overall ad campaign objectives. Higher value conversion goals may require larger budgets to generate ROI.

Determining Your Advertising Goals and Objectives

When working out how to calculate PPC budget, clear goals and objectives should be set first. Define specific and measurable KPIs, like increasing traffic, lead generation, or sales conversions. These, and the PPC metrics measured, will change depending on where in the marketing funnel you’re targeting.

Brand awareness: At this stage, your KPIs are usually based on website traffic or impressions. Invest more in PPC initiatives like display ads or social media advertising to reach a broad audience and maximise visibility.

Lead generation: PPC strategies at this stage should encourage user engagement, via lead gen forms on social media, or gated content and landing pages advertised via Google Ads. At this funnel stage, keyword campaigns that answer a specific need can be extremely helpful in driving the right kind of user toward your forms.

Sales conversions: Usually, for this stage of the funnel most PPC budget allocation will go toward retargeting and product advertisement strategies. By now, users should be familiar with your content and PPC advertising should focus on offering incentives to click through.

Aligning PPC budget allocation with marketing funnel stages and KPIs allows you to optimise your ads and maximise your ROI.

Estimating Costs and Forecasting Results

Estimating PPC advertising costs involves analysing various factors such as keyword competitiveness, bidding strategy, and campaign scope. Different approaches can be used for estimating costs, including:

Industry benchmarks: Businesses can compare their cost-per-click allocations with industry averages to gauge competitiveness and determine if budgets should shift. Use various sources and keywords to determine an average CPC rate across your campaign.

Historical data analysis: Examining past campaign data and associated costs can help inform future PPC budget estimations, and account for seasonal shifts and trends. If a keyword’s cost has increased by 10% year-on-year, for example, you can assume the same for the next 12 months and adjust spend accordingly.

Third-party tools: SEO tools like Google’s Keyword Planner are essential in conducting in-depth research. Using these you can see alternative suggestions, search volumes, competitiveness, and suggested bid prices. For example, if the survey platform Customer Thermometer wanted to target keywords related to “survey maker”, they can use Google’s Keyword Planner to find the average cost-per-click is £3.00.

Setting A Realistic PPC Budget

Part of the fun of calculating a PPC budget is figuring out how to balance your monetary limits with your desire for maximum campaign success.

Set realistic expectations for yourself (and the big bosses), so that you can manage expectations based on available resources and cost-per-click rates. If you calculate expected ROI in advance, using the methods above, you can present reasonable figures and show how true the old adage “spend money to make money” can be. E.g £10,000 spend doesn’t sound so bad once it’s balanced against returns of £100,000.

Example: How to calculate your expected spend for a lead generation campaign

Target Number of Leads / Expected Conversion Rate (using current website rates as a starting point) = Number of Clicks Needed

Followed by:

Number of Clicks Needed x Expected CPC = Ad Budget Needed

Therefore, a company trying to get 100 new leads per month with an expected conversion rate of 5%, would need 2000 clicks per month.

The key to success here is a solid PPC strategy and bid management that aligns with KPIs. By leveraging additional tactics like including long-tail keywords or Ad Assets on Google Ad campaigns, you can improve ROI without having to adjust the overall budget.

There are trade-offs you can make within your PPC campaign to align with realistic budget allocations. Like only targeting specific audience segments that are most likely to engage and convert, over trying to hit every demographic.

In the same vein, continuous monitoring of your PPC campaigns allows you to have better bid management and more easily identify areas of wasted spend so as to more effectively balance your budget.

Allocating Budget Across Campaign Elements

We’ve already touched on the importance of considering overall business KPIs when allocating budget, but assessing the different elements of a PPC campaign’s effectiveness is also essential in maximising ROI.

For example, the ad platforms you choose to work on should be determined by marketing stage and overall business goals. By spreading your campaign, and budget, across multiple spheres (social, Google etc.) you can reach your target audience across multiple channels, improving brand awareness and maximising touchpoint potential.

The keywords targeted should also impact your budget allocation. If you’re choosing a bunch of high CPC keywords, for example, you’ll need to funnel a substantial amount of your budget into achieving priority placing for them. This can be mitigated by choosing words that are low-competition but have good volume potential, like long-tail keywords.

Other considerations to bear in mind can include:

Geographic location: Do you have specific areas of the country or world that you want to target? Choosing to funnel more of your PPC budget into specific locations can help maximise visibility in those target regions.

Scheduling: Adjusting your ad’s budget depending on the day and time will maximise its impact and visibility. For example, there’s no point in running an ad aimed at teachers during classroom hours.

Targeting: Choosing to focus budget on remarketing and specific interests or behavior types can help niche down who is seeing your ad, to the most likely to convert audience segments.

Formats: Deciding which ad types (search, display, video, etc.) are most effective for achieving company goals helps inform budget allocation. You should also utilise A/B testing to see which formats and ad types resonate best with your audience. Continually monitor metrics in the ad platform or using tools like Google Analytics to assess the impact of this and engage users across multiple formats for maximum visibility.

By strategising budget allocation across various campaign elements, it’s easier to hit KPIs and impress stakeholders with your PPC success rates.

But above all, don’t be afraid to experiment to find those sweet spots in your bid management process and take advantage of AI by using automated bidding to hone in on the most effective campaign types.

Monitoring and Adjusting Budget Allocation

The most successful PPC campaigns are ones where metrics are chosen carefully, tracked closely, and adjustments are made reactively.

With continuous monitoring, it’s far easier to identify areas for improvement and minimise wasted ad spend. It also enables your business to immediately respond to any market shifts, like a competitor releasing a new product, or a new campaign that targets the same demographic as you. Or even just remove budget being spent on low-performing keywords or ad placements.

To stay competitive, the PPC metrics that align with the business’s KPIs should be continuously tracked, whether that’s ROAS, clickthroughs, cost-per-acquisition, etc.

In analysing this performance data across different campaigns and ad groups, you can make choices and back up strategic decision-making with proof of analysis. In turn, this will adjust budget focus to high-performing keywords and ads for improved ROI without needing to increase your overall PPC budget.

This instils confidence in budget reallocation choices. When monitoring Alfresco’s data, for example, Common Ground found that campaigns were based on stakeholder desires rather than actionable metrics. In reviewing and monitoring existing ad’s success rates, we were able to divide campaigns into groups and focus budget accordingly on the lowest CPA options.

Planning for Contingencies and Optimisation

Effective PPC budget allocation requires accounting for market shifts and seasonal trend variations. That means the more advance preparation and research that’s done into industry benchmarks, the better able you are to plan ahead and shift budget accordingly depending on the time of year etc.

Of course, changes can occur unexpectedly in any market, which is why it’s not just advance planning, but continuous monitoring that’s crucial in being reactive and planning for contingencies. Some companies set aside an additional portion of the overall PPC budget for scenarios just like this, in case competitors launch a new product, or an aggressive marketing campaign that obscures yours, for example.

Other reasons a contingency fund could be useful is if platform updates or technical issues disrupt your campaigns or external events like societal shifts in perception occur that could undermine the benefits of your product or service. For example, when AI exploded last year, companies offering B2B solutions shifted marketing gears to highlight AI utilisations in their product.

Not all of this necessitates having a contingency fund, effective budget reallocation and reactivity can often do the job. The important thing is planning for these contingencies as part of your overall PPC strategy.

As long as you remain flexible and respond in real time to changing marketing conditions, competitor activity and performance metrics, you’re a step ahead of the game in ensuring your PPC campaign is well optimised, and budget is allocated effectively.

Continual testing, learning and refinement are extremely valuable in honing your ads and campaigns to really speak to your audience, and A2B testing provides more granular insights into which aspects of your ads are most effective.

By making this a habit across your campaign’s lifecycle, you’re continually learning best practices and optimising your overall strategy and bid management. Staying informed and responsive allows you to maintain that edge over competitors.

To Sum Up…

In essence, PPC budget allocation needs to be based on a variety of factors:

• Shifting industry trends
• Reactive responses to campaign performance and testing
• Historical data analysis
• Company KPIs and overall business goals
• Strategic planning and bid management

At all times, data-driven insights from your campaign performance and testing need to inform any changes made. With continual and reactive monitoring of your PPC campaigns, budget can be allocated to the best-performing ads or keywords, driving an overall higher ROI, without needing to add more money to the pot.

Don’t forget to take all this into account when planning your next PPC campaign, and tell Common Ground what adjustments you plan to make to your PPC strategy now you’ve read this article.