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.
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.
Since 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).Ceteris 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.
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.The 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.
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.
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.
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.Looking 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.
When you notice any of your campaigns regularly hitting daily budgets, ask yourself a few questions:
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.