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If you’re considering spending a decent portion of your marketing budget on Google AdWords, you should be aware that it’s the most expensive pay-per-click service in the industry - especially for small businesses that are just starting out. You might be quick to assume that Google AdWords is priced similarly to an advert on a roadside banner or a radio slot, but it isn’t.
A budget for AdWords isn’t defined, as it all depends on your competitors and industry niche. It’s effectively an auction marketplace, where Google sells its’ highly desirable AdWords to websites as a way to rank higher for keywords and attract more visitors.
Use Google’s Keyword Planner
You need to determine which keywords you want and the amount you’re willing to spend on each click. Use Google’s Keyword Planner to research keywords and find other relevant keywords to target. Don’t use a generalised idea to create a campaign. Instead, choose keywords to run a test campaign; they should reflect your goals for the campaign. Start with a small number of keywords to begin with - preferably around 10.
Once you have a realistic idea of the keywords you want, look at the auction prices. If you bid $10 on a keyword for a product that costs $20, you’ll have to convert 50% of traffic just to break even, which would be almost impossible to achieve. Your test campaign might not be profitable, but its’ a route to determining what works best. Therefore, aim to get at least 100 clicks on each ad to know what converts best.
The minimum amount to spend on Google AdWords
There isn’t a minimum amount to spend on Google AdWords, but you shouldn’t begin with a $2-$5 daily budget. Even when you’re testing with a small budget, start with something that translates well into real life. The logic that a small, inexpensive ad has to produce a result before you shell out the big bucks on more expensive AdWords is flawed. This is because AdWords are auctioned and the higher value AdWords are the best, which is why they are more expensive.
You’ll need a realistic budget to get started. Putting $10 in and expecting to reap any rewards is a waste of money and quickly adds up in losses for your small business. So, spend more money to determine the keywords, geo-locations, devices, times of the day, landing pages and income levels that convert best.
Whatever you’ve anticipated, you won’t know until you actually spend the money and make the required adjustments to remove wasted spend. The adjustment period is important. Wait for the first month before rushing to fire your PPC manager. Those who are patient usually reap the most rewards. Therefore, set your adjustment period to two months for realistic results.
Instead of spreading $10,000 over the course of a year without success, spend the sum in one quarter, spread at $2,500 per month. The results will determine which advertising channel produces workable results. It also increases your chances of success, as you’ll compete on even terms with other marketers.
How much will the traffic cost?
According to Robert Rolls, Head of Online business at Discount Domains NZ, some industries are notorious for having the most expensive cost per click. This includes HVAC, Locksmiths, Pest Control, Plumbing and Financial Services.
Some keywords cost between $50-$60 per click, so if you only commit a budget of $1,000 per month, you’re categorising Google AdWords as a non-functional marketing channel. For example, if a client budgets $1,500 per month for clicks that cost $50 each, that’s only 30 clicks per month. It's therefore more prudent to pay $30 for a keyword that brings in thousands in revenue than $5 for a keyword that doesn’t have any real value.
Be very specific when targeting keywords to get relevant traffic that converts. If you’re selling perfume, don’t target the keyword ‘perfume’, as there are many reasons why someone could be looking for that particular search item. Instead, aim for local search terms such as ‘perfume store in Brighton’ or ‘best female perfume Brighton’. This ensures you’re paying for clicks directly relevant to your business.
Once you have a profitable campaign, ditch the budget
The best marketers never put a cap on their Google AdWords campaign, because they know that the more money they spend, the more they get out of their budget. Your goal is to make an investment that returns a profit, many times over.
Focus on ROI instead of managing cost. If you spend $200,000 a month on Google AdWords and make a profit of $400,000, wouldn’t you be looking for ways to spend more money on advertising, because it's working so well? Many advertisers simply focus on keeping their CPC costs down, but that’s only half of the equation. The leverage is in increasing your EPC (Earning Per Clicks), as that’s’ how you’ll win the AdWords game.
With geotargeting, you’ll prioritise the display of your ads to searches coming from an area where most of your target audience is located. This could be a particular county, the block where your store is located, or just a small area somewhere. It’s a smart way to capitalise on mobile traffic trends, as visitors tend to shop on the day.
You could also target a specific day of the week or the hours when people are coming home from work. When testing to see what works best, track the targets and cost, but increase it after you’ve determined which targeting and bids are most effective.
How much does the average business spend on advertising?
To answer this question, you need to consider the average spend of businesses in your industry. Listed below are the top 10 industries with the most expensive AdWords, according to Wordstream.
From this list, we can see that some of the most competitive terms are in the legal, financial and insurance industries, though Wordstream says the amount varies. Some customers only spend $1,000 per month, while others spend upwards of $30,000 per month. Meanwhile, the average client spends almost $10,000 per month on PPC advertising.
There are many factors influencing the cost of running a successful PPC campaign. Those who outsource to a professional team are more likely to achieve positive results than those who decide to manage campaigns on their own. So, don’t start with a tiny budget that doesn’t yield any results. The major benefit of spending more upfront is that you’ll get a better return from your budget.