By Phil Frost March 20, 2019
Google
Ads have helped many businesses thrive because of their power in generating
leads and sales. The problem is that this power can be difficult to navigate,
which has left some businesses on the sidelines wondering why they didn’t see
results.
The topic
of how much to spend is one that is tossed around among users and
professionals, alike. The answer depends on how well you run your ad
campaigns.
Budget for New Google Ads Campaigns
When you
first use Google Ads, limit your budget. At this point, you do not know which
keywords, ads or landing pages will be most effective, so you need to test
different strategies. Because some of the money will be lost, you don’t want to
waste too much.
The goal
during this stage isn't to make a huge profit. It’s to either make a small
profit, break even or only lose some money. Your mindset should be that you’re
investing in market research for a much more successful future with Google Ads.
Limiting
your budget is a bit arbitrary. Simple math can give you a concrete amount for
a budget.
Multiply the estimated
cost per click of each keyword you want to test by a minimum of 100 to 200
clicks. This will ensure you're giving each keyword a fair test. For instance,
if you are testing 10 keywords with a cost per click of $1, you should consider
having a budget of $1,000 to $2,000.
Growing Out of the Budget
You will
know when you’re out of the testing phase when profits exceed your budget. This
is the sign that tells you to abandon the budget.
Yes, you
read that right — no budget.
It’s not
about how much you spend on Google Ads — it’s about how much return on
investment (ROI) you’re get from it.
Think
about it for a minute. If you’re making $2, $3 or $4 off a $1 investment, why
would you want to cap that? That’s success right there, and you might as well
run with it.
Switching From CPC to EPC
Too many
people focus on the cost per click of their keywords when they really should be
paying attention to their earnings per click (EPC). If you have the highest
earnings per click vs. your competitors, then you know you can outbid them to
gain more clicks, more leads and more customers.
So, how do you calculate
your EPC? All you have to do is multiply your conversion rate (the percentage
of people who become paying customers) by your customer value (the amount of
money you earn from that customer).
To
understand this better, let’s say one customer generates $500 for you. If your
conversion rate is 1%, then your earnings per click is $5. This is your golden
number. Keywords with a CPC less than $5 will be profitable if your conversion
rate remains 1%.
With this in mind, it's
important to note that increasing your EPC is the best way to compete in Google
Ads.
The cost
per click for your target keywords is not likely going to go down ... In fact, there's
a good chance you'll need to pay more per click in the coming months and years.
That means your EPC is your biggest competitive advantage.
Conclusion
You know
that spending a lot of money on Google Ads isn’t what produces results. Ad
campaigns need to be run effectively and a budget needs to be used in a way
that helps identify what works best in your market. Once that information
reveals itself, removing the budget (if possible) and focusing on ROI is the
best decision, moving forward.
And
remember, the business with the highest EPC has the advantage in Google Ads.
Want more
tips to improve your Google Ads campaigns? Click here to grab a copy of our "Ultimate Google Ads
Checklist."
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