Budget Time for Budget Checks


Daily campaign budgets in Google AdWords are great. You simply enter the maximum you want to spend per campaign per day, then sit back and relax, safe in the knowledge that your monthly Google bill will not cause any nasty surprises.

But despite the reassuring nature of campaign budgets and the ease at which they can control your spending, they should not be used to control your spending. Instead, cost per click (CPC) bids should be your tool of choice for spend management.

More clicks, no extra spend

To understand why, suppose the daily budget for one of your campaigns is set to $100/day. Each click costs you $1.00 and your ads are showing in position 3.0. Your daily budget of $100 is being hit, so you receive 100 clicks/day.

AdWords Daily BudgetsSince your campaign is reaching its daily budget, your ads are not showing for all eligible searches. Depending on your campaign ad delivery settings, either your ads are not showing later in the day (accelerated delivery), or they are only showing intermittently (standard delivery). In either case, you are missing out on potential customers.

Now suppose you were to reduce your bids by 25%. Your average cost per click drops to $0.75 and your ads are now showing lower down in position 5.0. But since your ads are now appearing throughout the whole day for all eligible searches, you receive more clicks. Instead of 100 clicks, you now receive 120 clicks. Daily spend is now $90 (under your budget of $100).Google AdWords Keyword BidsCeteris paribus, reducing CPCs for campaigns which hit their daily budgets is likely to give you more clicks for no extra (or possibly less) spend. That’s more visitors, for no extra spend. Assuming that all clicks are of equal value to your business, and average position does not affect your conversion rate, these extra clicks are likely to mean more sales and a higher ROI.

More clicks, same CPCs

Alternatively, leaving CPCs constant and instead increasing your daily budget, will likely result in more clicks for the same average CPC. That’s more visitors, more potential customers, without paying a higher per-customer premium (CPC) for the privilege.Optimize Google AdWords KeywordsThe bottom line is this: campaigns which hit their daily budgets are inefficient.

For this reason, it is important to check on a regular basis that each of your campaigns are well within their daily budgets. If you notice any of your budgets are being reached, or ore close to being reached, alarm bells should start ringing.

Check your budgets

One simple way to keep on top of daily spending is to log in to Google AdWords, select ‘yesterday’ as the time period and compare the ‘cost’ and ‘daily budget’ columns for each of your campaigns. If any of your campaigns are hitting – or are close to or hitting – your daily budgets, either increase your budget (if extra spend is financially viable), or reduce your CPCs.

A more comprehensive approach, which looks at campaign costs a longer time period, gives you a better understanding of daily trends. By looking at a month’s worth of data (instead of just ‘yesterday’), you will be more informed and better equipped to make changes to your CPCs and budgets.

Download a campaign report

Log in to Google AdWords and create a new report. Select ‘campaign performance’ as the report type (since daily budgets are set at campaign level), select ‘daily’ as the unit of time and enter a date range such as ‘last 30 days’. In ‘add or remove columns’, ensure ‘daily budget’ is ticked. Leave all other options as default. Run the report, and export it to Excel.

Identify overspend

Once you have the report in front of you in Excel, create a new column to identify the percentage of budget spent by each of your campaigns each day, such as in the example below. Once you have done this, you will then be able to see how close each of your campaigns came to its daily budget.

Suppose you are a retailer of European holidays. You have two campaigns – one for Venice and one for Amsterdam. Both campaigns have a daily budget of $100.Reduce Google AdWords CostsLooking at the % spent column, it is clear that the Venice campaign is regularly reaching its budget. Reducing CPCs for Venice keywords would likely result in more clicks for no extra (or possibly less) spend.

By all means continue to set daily budgets to protect against freak spikes in traffic which you cannot afford, but make sure CPCs – rather than budgets – are your primary tool for spend management.

Summary

When you notice any of your campaigns regularly hitting daily budgets, ask yourself a few questions:

  1. Are you achieving less than satisfactory results from your current AdWords spending? If so, reduce your CPCs – you will likely see more clicks for no extra spend.
  2. Are you achieving satisfactory or good results? Do you have extra funds available for AdWords? If so, increase your daily budgets – you will likely see more clicks for the same CPCs.

Either way, it’s a win-win. You will either get more clicks for the same budget, or more clicks for the same average CPC. Effective spend management is essential for a performing PPC campaign, so make regular budget checks a priority.

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Alan Mitchell is an experienced Google AdWords consultant helping businesses increase their return on investment from PPC marketing. For more information on how efficient PPC budget management can benefit your business, get in touch today for a free consultation.

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  1. #1 by Rob on October 2nd, 2009

    I like it. Have not personally faced this issue before because I don’tget close to my daily spend limit for any of my campaigns.

    I’ve divided the account up so much, it helps with that.

    RM

  2. #2 by David Bushell on January 13th, 2010

    Alan,

    It’s good to give this a read after the similar post I wrote that you commented on recently (http://www.1upsearch.co.uk/blog/google-adwords-blog/maximise-clicks-lower-bid.html).

    I think you’ve made the point really well – that you should either be raising your budget or lowering your CPCs. In raw business terms, this means you should be raising your volume or increasing your margin. Any business that isn’t doing this has either saturated the market at the optimal CPC or, as you say, is inefficient.

    I think the key point here, is that lowering CPC and increasing daily budget are the 2 fundamental growth strategies available to the PPC marketer or entrepreneur. It’s amazing how few people are conscious of this hugely important strategic choice – they just bang in a bid and hope for the best… and this is happening in agencies too!

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