Determining the right budget for Google Ads or PPC (pay per click) in general is easier than you might think. However, those who are stuck in the world of fixed sizes and fixed prices still find it difficult. We are always asked "what should I allocate as a budget per day or month, i.e. what is the maximum amount that can actually be spent?" This question makes sense at the start of ad activities. Later on, it usually doesn't. I'll try to explain why here.
How to determine the right budget for Google Ads
If you are advertising purely for brand awareness or simply to generate clicks(traffic), it is not possible to determine a sensible, correct budget. Small and medium-sized SMEs in particular will in most cases only burn money with this approach. Apart from the above-mentioned exceptions, your marketing budget on the web must be measured strictly according to the ROI (return on investment) principle. As a rule, this is called Return on Advertising Spend (ROAS) and corresponds to the Return on Investment (ROI) for Google Ads and every other PPC measure. In clear but simple terms, this means If your online marketing activities are performing as well as they possibly can, then the budget is determined exclusively by the ROI and not by a vague, meaningless phrase such as "I can (not) afford that"
The online term "can afford" in performance marketing
The only time the phrase "can afford " can come into play is when a PPC campaign is completely restarted and there is no reliable data to use for calculation and decision making (usually shown above as"n weeks" of data collection). In this phase, the budget used could be considered lost or wasted, as you cannot be sure whether profitability will be achieved. But even here it is important to measure fairly. Simply investing € 100 in a two-week campaign (that's about € 7 per day!) and then assuming or announcing that the campaign was a huge mistake is dubious, as in contrast € 1,000 in a four-week campaign (that's just under € 33 per day) could lead to sensational success. Success with Google Ads as well as other PPC measures depends on how many "shares of the search market" you can achieve in a defined environment. This is usually referred to as the"share of search impressions". And then, of course, how many of the search impressions you can convert into ==> clicks and then into ==> leads and ==> sales and therefore ==> profit. The budget should initially at least high enough to obtain statistical data for optimization and at most high enough to be able to live with the fact that part of the budget will be spent on testing, especially at the beginning (training money). If the initial budget allows, try to ensure that the ads always appear. With this overall starting position, optimizations can best be made.
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Change your mindset for the right Google Ads budget
Imagine a large parking lot. Let's say there are 1,000 cars there. Now you put an advertising flyer under only 20 windshield wipers of the cars. And you only do this once. Now imagine you put 800 flyers under the windshield wipers and repeat this 10 times a day. Which analysis afterwards is more meaningful? This is also a reason why the media budget should be higher at the beginning of a campaign than later on! Unless your offer is affected by a physical limitation (e.g. for a hotel - you have no more rooms available or the occupancy rate is already 98% and any further acquisition is no longer profitable) or the click price increases in such a way that no more profit would be generated in the sequence, the principle applies: The budget should be set at an unlimited level! However, this also requires comprehensive tracking!
Apart from an incorrectly calculated media budget , there is still a lot you can do wrong with Google Ads anyway. And if you are receiving a lot of leads via "virtual values" (e.g. leads) but are still not satisfied (making a profit) then also check your internal processes! Maybe it's not the ads but your internal sales processes!