A large chunk of the world’s population may not be familiar with Google Adwords but they have all likely interacted with its output in some form if they have ever searched on Google before or visited websites that served advertising banners. In 2015 alone, online advertising generated $67.39 billion in revenue for Google.

Online Advertising Graph

That is a whole lot of impressions and clicks that Google redirected to different landing sites with the potential to turn into leads and customers. And this is why Google Adwords continues to attract an increasing amount of advertising every year. If you’re not sure what Adwords or PPC is, and why your business should be engaging in Search Engine Marketing, we recommend you to read our article on the topic.

When it comes to your Adwords campaign, one question that always pops up is how much to spend every month? A major positive about Google Adwords is that it is very customisable and you can easily vary your budget for different needs and results. We know this sounds vague and non-committal. That’s why we’re sharing the blueprint for you to determine a sensible budget for your own Adwords campaign. We recommend DIY readers to always start out with a Test Phase in order to determine their budget. Since we’re focusing on budget, we’ve skipped the steps for setting up your Adwords campaign.

Test Phase

1. Determine the right keywords

Know The Right KeywordsCreate a list of keywords that are relevant to your business. Keep in mind that Google estimates cost per click (CPC) based on the keywords. This is known as ‘Adwords Suggested Bid’. To determine how much your keywords are going to cost, use the Keyword Planner from Google. When deciding on the keywords, be mindful of your goals and WHERE in the customer buying cycle you’re targeting for your visitors.

If you’re planning to increase your online sales, you want to focus on keywords that have more ‘buying intent’. For example, if you sell shoes, keywords like “buy shoes online” or “best deal for shoes” are more likely to convert to sale than a generic keyword like ‘shoes for dinner’. Some solid buying intent keywords include coupon, buy, discount, shipping and deal. You can also focus on product keywords like cheap, affordable, brand name & product, review, and best. Someone looking for these keywords in your phrase is much further along the buying cycle towards a purchase. If you’re looking to get as many visitors to your website, words like ‘free’ and ‘how to’ are good for attracting them, but these are not likely to convert to a sale.

2. Decide on a test time frame

You must decide on the duration for your test phase. A month can be a good length of time to determine the effectiveness of your keywords. Consider the nature of the product that you are selling when deciding on your timeframe. Does your product “fly off the shelves” or does it usually require a longer buying timeframe? Keeping these into careful considerations will help you make better sense of your data.

3. Start With A Small Budget

Based on the Adwords Suggested Bid for the keywords you select, as well as the price of your product, you’ll be able to gauge how much money your Adwords campaign may need to expense each month. However, it’s always a good idea to start slow, until you’re comfortable with the Adwords interface and with your potential returns. Based on the Keyword Planner tool, you’ll also be able to get an estimated optimum daily spend. Use this to keep your initial bid for each keyword low and maximize your impressions. Increase bids based on performance of the keywords. At this point, you should set up your campaign, your Ad Groups, your ads and keywords and then finally, put money into your Adwords account to get started. If you’re a little more savvy, also link up your Google Analytics to your Adwords account and set up goals for better performance tracking. When starting out a campaign, stick to broad match keywords.

4. Cull Your Non-Performing Keywords

It is estimated that one 1 in every 100 clicks of your online ads will result in a sale. While it is tempting to check your results everyday, we suggest looking at it once a week. Look at the search terms that people are finding your ads with. Add keywords irrelevant to your goals and business into your ‘negative keywords’ list so that you don’t waste money on them. By the end of the month, you would have a growing negative keyword list that your budget will not be wasted on moving forward. Go through your original keywords list and start determining the performance of the keywords. This can be based off a comparision of your Analytics data (if it’s connected to your Adwords, this is much easier) to your Adwords results. Figure out the keywords that brought in the right targeted traffic and generated sales. Start culling those that generated very little impressions or clicks (unless the buying intent is really strong). Start updating your keyword list by shifting from broad match to broad match modifier keywords, phrase match or even exact match keywords. This reduces the overall number of impressions or clicks you receive but drives much more targeted traffic to your site.

If you are struggling in determining your sales generating keywords, consider hiring a professional SEM service.

Maximize Your Adwords Campaign ROI

Maximise ROIWhen advertising online, you should aim to derive the profit generated from every click of your ads to ascertain the level of success your campaign is having. This is known as your Earnings Per Click (EPC),  which is the best way to determine your return on investment (ROI) and identify the keywords yielding the best returns.

How to Find Your EPC

To find your EPC, multiply your customer value and your conversion rate. The customer value is how much profit you generate from a paying customer and the conversion rate is the click percentage that turns into a sale. For example, if you are promoting a product that gives you $20 in profit and it converts at 1% then your EPC is $0.20.

Ideally, you want this value to be positive and getting larger month over month. Based on your EPC, and your profits, you can determine your monthly Adwords campaign budget for following months and increase or reduce it accordingly. Of course, to keep growing your EPC, you would want to optimize your campaign further. You can try out copywriting experiments for your ads, modify your keywords lists and experiment with pricing models other than CPC.

If your ads didn’t perform as expected in the first month, it’s not cause to give up. You probably need to take a closer look at your keywords list and optimize your Adwords campaign further, and test for another month. This is why starting with a smaller budget helps – it allows you to get acquainted with Adwords without being too expensive a lesson.

Do you run Adwords campaigns for yourself? We’d love to hear about your experiences and any tips & tricks you have discovered when setting the budget for yourself.