If you’re anything like most marketers and entrepreneurs, you’ve likely got a Google AdWords budget, but no strategy to support your spending.
And the fact that you’re reading this blog is a good indicator that your strategy of no strategy has resulted in you wasting money on unsuccessful campaigns or underfunding particularly successful ones.
Luckily, planning your Google AdWords budget effectively is relatively easy. In fact, this blog will help you do exactly that in four simple steps!
Let’s get started.
STEP 1: Know Your Google AdWords Goals
When defining their AdWords end-goals, many people fall into the trap of creating ads that coax clicks and conversions, failing to see the lack of value these hold for their business.
Don’t be like them.
You need to focus on goals that really mean something for your business. And in digital marketing, the ultimate goal is to produce profitable sales. Sure, clicks and conversions are great predictors for sales, but they are not a substitute for them.
Simply put, it’s about ROAS, not ROI.
So, before you plan your AdWords budget, you need to calculate how much sales revenue you need your campaigns to generate. Only then can you determine the right budget to reach this revenue goal.
Put it on paper, and we’ll circle back.
STEP 2: Define Your Desired Buyer Personas
To plan an effective Google AdWords budget, you need to know who you will be targeting with your ads – enter the buyer persona!
These in-depth profiles define each of the ideal customers you are trying to reach with your marketing messages, giving you the insights needed to what prospects need and want to ensure effective targeting.
These personas will influence your budget planning significantly, as each proposed prospect will respond to your ads differently, click on different ads, and convert on different landing pages.
STEP 3: Calculate Your Target Customer Acquisition Costs (CAC)
To do this, you’re going to need:
- Typical target customer lifetime value (segmented according to product or order)
- Net profit margin
- Percentage of revenue spent on marketing
Once you’ve gotten this data from your accounting department, add the percentage of revenue spent on marketing to your net profit margin to see how much revenue generated from a new customer is spent on things like rent and sales commissions.
Once you have this data in hand, take your net profit margin and add the percentage of revenue spent on marketing. This will tell you what percentage of the revenue from a new customer is consumed by things like fulfilment cost, sales commissions, rent, etc.
Then, multiply your customer lifetime value by your remaining revenue to see how much profit is left over to play with. To avoid losing money on every sale, your CAC should be well below this.
Now, to calculate your CAC, all you need to do is divide the percentage of revenue spent on marketing by the number of customers acquired in the time this revenue was spent.
To put this into practice when planning your AdWords budget, it’s recommended that you aim to spend, at most, 25% of your typical target customer lifetime value on acquiring a new customer.
STEP 4: Choose Your Google AdWords Budget
Now for the easy part.
To determine your AdWords budget, all you need to do is calculate what percentage of each buyer personas’ projected lifetime value is taken up by each of these personas’ target CAC.
Then, multiply your desired lifetime value from AdWords by this percentage – easy right?
By following these steps, you should have no problem planning your Google AdWords budget efficiently and effectively.
However, even the most resourceful marketer may become overwhelmed. If that’s you, reach out to the Google AdWords specialists at Smart Finch Marketing.
We have extensive experience planning budgets and managing accounts for Google AdWords for a plethora of different businesses and industries. With us on your side, you’ll be able to make strategic decisions and maximise the value of your ad spend.
Contact us today to discuss your budget and how we can revolutionise it!
Related Tag: Google Ads Management