First, Start
with a Test Budget.
When you’re just
starting out, you’ll want to contain your costs, because you don’t know
what’s going to work.
You’re in testing mode.
It’s possible that your initial test campaign will be profitable, but
you may only break-even, or you may lose a little money. We’ve created
a lot of campaigns that were profitable right out of the gate, but you
shouldn’t expect this to happen. Instead, your mindset should be that
you’re investing in market research.
With your initial
testing, you’ll gain insights into what ad messages are resonating with
your target market, and you’ll also learn what keywords are converting
into qualified leads and customers. Plus, you’ll be able to test which
messages on your landing pages are working best for converting clicks
into leads and customers.
What should your test
budget be?
You can roughly
calculate your test budget by multiplying the number of keywords you want
to test by the cost per click and by a minimum of 100 clicks. As a
general rule, you’ll want to get at least 100-200 clicks on a keyword
to determine whether it converts for you.
So, for example, if
you’re going to test 10 keywords with a cost per click of $1, we’d
recommend you plan on a test budget of $1,000 to $2,000. Most likely,
you’ll have a mix of winning and losing keywords, ads and landing pages
from this initial test. As you see the results come in, you’ll “prune”
your campaign — keeping the winners, dropping the losers — to bring
your campaign to profitability.
…Then, Ditch the
Budget.
Once your campaign is
profitable, you should ditch the budget.
The most successful
advertisers don’t cap their budgets. They know that effective
advertising is one of the best investments you can possibly make in
your business.
Think about it: If
you’re investing $1 into Google Ads and getting $2, $3, $4 or $5 in
return, why would you want to put a cap on that?
Assuming you want to
grow your business, you should want to make that investment as many
times as possible.
Focus on ROI,
Not Cost
If you want to be the
dominant advertiser in your market, you can’t just focus on managing
costs — you must focus your energy on maximizing your return on
investment (ROI) from advertising.
We have a client who
spends more than $100K per month with Google Ads. And he’s happy to do so
because he earns a healthy profit on that advertising. In fact, every
month, he’s asking us for ideas for how he can invest MORE money into
advertising!
So how do you get to
the point where you’re scaling up your advertising and capturing more
market share?
Focus on EPC,
Not CPC
You can’t just focus on
cost per click (CPC). Many advertisers just focus on getting their CPC
down. They try to write better ads to improve their Google Ads quality
scores so they can get cheaper clicks. But that’s only half the
equation.
Of course, you should
always be looking for ways to make your advertising more efficient. But
minimizing CPC is NOT where the real leverage is located.
Instead, the real
leverage in Google Ads is in increasing your Earnings Per Click (EPC).
If you have the highest
EPC in your market, you can outbid your competitors and gain more
clicks, more leads, and more customers. That’s how you really win the
Google Ads game.
How To Calculate
Your EPC
It’s simple.
Just multiply your
conversion rate (the percentage of people who click you become paying
customers) by your customer value (the amount of money you earn, minus
fulfillment costs, from 1 new customer).
Here’s the equation:
EPC = Customer Value X Conversion Rate
For example, if an
average customer generates $100 and you have a conversion rate of 1%,
then your EPC is $1.00.
That means you could
advertise profitably on keywords with a CPC under $1.00.
But what would happen
if you increase your EPC to $1.50 or $2.00? Well, you’d be able to
profitably increase your bids and gain more market share. In our
experience, when you can increase bids by 50% or 100%, you typically
will gain much more than 50% or 100% more traffic (typically it’s a
multiplier effective where you can get a TON more traffic).
So if you really want
to dominate your competitors in Google Ads, you need to focus on
maximizing your EPC.
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