How to Set an Effective Google Ads Budget

Google Ads Budget
Google Ads Budget

Every business wants to advertise online, though the initial learning curve is often enough to keep them from doing so. Business Warrior is tackling that learning curve at its first step: setting an effective budget. Last month, we went over how to set an effective Facebook ads budget, so it only made sense that the next step was to go over Google Ads budgets. 

What is a Google Ads Budget? 

A budget in Google Ads, formerly known as Google AdWords, is how much your business would like to spend each day on an ad campaign over a month. Google Ads, much like Facebook, isn’t set on a daily spend – if you monitor your campaign, you’ll see fluctuations day by day. That is totally normal. Those fluctuations will rarely exceed your total monthly budget. 

How Much Should You Spend on Google Ads? 

Generally speaking, how much you spend depends on what you want to get out of your campaign. Setting a budget can be tricky. You’ll want to research the average cost-per-click (CPC) for your keywords – that is, how much it will cost you every time someone clicks on your ads — so you can find out how many clicks per day you can receive before your budget runs dry. For example, let’s say your industry has an average CPC of $10 and you want to spend about $50 daily. That’s only 5 clicks a day. The part that hurts small businesses the most is the fact that not all of those clicks will lead to sales. 

Google Ads is a numbers and a quality game. The more clicks you get and the higher quality your ads are, the more sales you should see. If you have a low Google Ads budget and a high CPC, you shouldn’t expect a successful ad campaign. 

Determine your Bids

Google allows you to “bid” on ad placement. The higher you spend, the more likely your ad will appear on the first page. Google offers a few basic guidelines for setting bids, and it’s a good idea to stay close to their suggested bids. However, you also want to consider how much you can realistically expect to earn back from each ad.

How Much Can I Get Out of Google Ads? 

Like all advertising campaigns, Google Ads is a balancing act. You want to keep your CPC low and your return high, but to do so, you’ll need to know the difference between your profits from the ads and how much you’re spending on them. 

For example, let’s say you make $30 in profit from a single sale from an ad. You didn’t really make $30 because your CPC is $20. That means your return on investment (ROI) was $10. That leads us to our next topic: setting a budget that works for you. 

How to Set an Effective Budget

Learning how much to spend on Google Ads requires some research into your business, industry ad costs, keywords, goals, and audience. These four tips can provide helpful guidance throughout your research into how to set a Google Ads budget that matches your business.

1. Utilize Google’s Keyword Planner

In the world of Google marketing, keywords are king. Google’s algorithm is set to scan ads, landing pages, and websites for specific search queries and phrases (known as keywords) to identify where your business belongs. It’s why a car repair shop doesn’t show up in your search when you’re looking for pet food. 

The same logic applies to Google Ads. Use Google’s Keyword Planner to research the keywords you’re considering and find additional keywords to target. These can then be grouped into similar phrases. When a potential customer searches those phrases, your ad should appear. 

2. Run Test Campaigns

Not every ad will be a winner on the first try. Google Ads allows you to run two or more ads in the same keyword group simultaneously so you can see which one will perform the best. 

Use a Test Budget

You don’t need to put your full budget into a campaign to see how it will run. You only need enough to get at least 100 clicks on each ad and keyword group you’re testing. So, for example, if you plan to test ads for 10 keywords that have an average CPC of $2, you should plan to spend about $2,000 on test ads.

3. Optimize your Campaigns

Your test campaign will tell you exactly what ads worked and what ads didn’t. Using this data, you can optimize your campaigns and your budget to allow for a higher conversion rate and ROI. Here are some things you should optimize: 

Cost Per Conversion 

You do have some control over your conversion rate (not to be confused with cost per click). The higher your conversion rate, the lower your CPC typically will be. Google also bases CPC on industry demand, competition, and ad quality. 

You find it with this formula:

Cost per conversion = Total cost of ads/number of conversions.

Quality Score

Ad quality is higher when your ad contains the keywords you’re targeting, the right number of characters, and is relevant to the page it leads back to, which can be your website or a landing page. The better your ad quality score is, the better that ad is likely to perform. 

Set Negative Keywords

If you notice that your ads are bringing in unqualified leads – that is, people who want another service than what you’re selling – you can set negative keywords. These will disallow your ads from showing up in certain search results. 

4. Adjust your Google Ads Budget When Needed

Setting a budget isn’t a one-and-done deal. Your budget is a limit to how well your ads can perform – if your campaign is fully optimized and you’re seeing steady results, that’s great! However, those results will plateau because they will eventually be limited by your budget. 

Increasing your Google Ads spend can be a great way to improve your online marketing returns and generate more revenue for your business. After all, if you have a campaign that produces positive ROI month after month, you can be confident that each dollar you invest in it will return to you – and more – in the form of sales.

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