How To Calculate Your PPC Advertising Budget?
Advertising is one of the very few revenue-generating costs of business. But, it is becoming competitive with each passing day. PPC advertising sits on the verge of innovation in the advertising industry.
Traditionally, advertising has remained the race to cut through the noise and come in front of the customer. That had a lot of costs, and as the businesses grow, the cost increases. PPC advertising was a true innovation in this space. It introduced the concept of paying only for what you get.
PPC stands for Pay-Per-Click – and it is the new form of advertising that dominates the online advertising models. In this model, your cost for the ad depends upon the number of clicks it generates. It is variable and can change – the only thing you can do to control the costs is to set a budget on the advertising network (Facebook, Google, or any other network).
But how do you calculate your budget for PPC Advertising? What are the rules and parameters to come up with a budget? What are the factors that your budget depends on?
In this guide, we will try to answer all of your questions about calculating the PPC advertising budget. We will also share a simple step-by-step process of calculating it.
4 Easy Steps to Calculate Your PPC Budget
Let’s start with the step-by-step process of calculating the PPC advertising budget. The 4-step easy formula provides an actionable framework you can apply to your businesses and calculate your PPC Advertising budget for a specific campaign.
1. Set Clear Goals
The first step in the process is to set clear goals for the campaign. It is essential to know what do you want to achieve with this? As a business, you have targets to meet. You need to create brand awareness, convert prospects into customers, and retain the older ones. There are other targets as well.
You need to set a clear goal for the PPC campaign you want to calculate the budget for. What exactly is that you want to achieve with this campaign? The success of the campaign fundamentally depends on the clarity of the goals.
The right and clear goals for your campaign will also help you set the criteria for the success of the campaign. For example, if your goal is to create brand awareness with this campaign, the more reach it gets the better. On the other hand, if the goal is to convert prospects into customers, the success criteria will be a certain number of leads/conversions. This will ultimately decide the nature/strategy of the PPC advertising campaign.
In addition to setting the purpose/objective of the campaign, it is essential to set the timeframe you want to achieve it. It will help you decide whether you will need an aggressive strategy or not.
2. Calculate the Required Reach
After you have clearly defined your goals, it is now time to calculate the total reach required to achieve them. For example, if you have set a goal of acquiring 100 new customers with this campaign – you will probably need to reach a number way bigger than 100. Why? Because of your conversion rate. Everyone who sees your ad won’t convert – so you have to keep that in mind while calculating your PPC advertising budget.
There is some simple math you need to do to calculate the required reach for your PPC advertising campaign. The formula is:
Required Reach = New Customers Needed (goal) / Conversion Rate
For example, if you want to acquire 100 new customers, and your conversion rate is 40%, the required reach will be:
100 / 40% = 250 – This means, that you will need to reach 250 prospects if you want to acquire 100 new customers.
Please remember that this calculation is not required for brand awareness campaigns. If your goal is to reach as many people as possible – you will skip this part.
3. Get the CPC Data
The third step is to get the CPC data for your niche. CPC stands for Cost Per Click and is the price that the PPC advertising network is going to charge you for every click/conversion to your ad.
It is quite easy to get the CPC data and is often available on the publisher/network’s website. And even if getting this data may be simple, it is one of the most important aspects while calculating your PPC Advertising Budget.
There is no specific formula, and you will not have to calculate anything at this stage. All you need is accurate and reliable data. Although, you can use multiple sources to collect the CPC data and calculate the average CPC rate to be on the safe side.
4. Put it all together to calculate the total budget
Now that you have calculated the required traffic/reach for your PPC Advertising campaign and the CPC data. Put them together to calculate the total budget for your campaign.
To do this, all you have to do is to multiply the average CPC rate by the amount of traffic/reach that you calculated in the first step – like this:
Total PPC Budget = Cost Per Click(CPC) x Required Reach
For example, if the cost per click for your keyword/niche is $5, and you need to reach 250 prospects to meet your targets (in the first step) – your budget should be:
$5 x 250 = $1,250
Please remember that the data used in the calculations above is completely hypothetical and was there to educate you about the process.
To sum up,
PPC advertising can sometimes bleed a ton of money. If you do not set any appropriate budget, PPC advertising will only be a threat, not an opportunity.
To calculate and set your PPC advertising budget the right way, we have shared with you a 4-step easy formula that will guide you through the process.
In addition to calculating the budget, please keep in mind that you will also need to monitor the success of your campaign. If the return on the campaign is higher than your investment, you are doing good.
If you still face any problems in calculating your budget for your PPC campaign, feel free to reach us out for a consultation call.