We’re likely to raise some eyebrows with this: the best PPC budget is no budget at all.
The best PPC budget is one that creates the maximum profit for your business. It’s not an arbitrary, locked-down number (although we can help you forecast spend—more on that later!) It’s simply the amount that will grow your business at the optimal level.
So how do you find this “magic” number?
1. Manage Your Campaigns to Profit for the Best PPC Budget
This is the single most important thing you can do for your campaigns, your business, and your PPC budget. Don’t rely on metrics like ROAS, which account for efficiency but not for sales volume, to drive your strategy. Instead, manage your campaigns according to profit. This does take some work if you’re not already set up to do so. You’ll need to make sure the cost of goods is accounted for (on the SKU level, if possible), and understand the role your campaigns play in growing your business. Be ready for decisions like, “How much profit should I be aiming for?”
PPC Budgets are not an exception to this strategy. Again, the best PPC budget is the one that maximizes your profit. Seasonality matters: the ad spend needed to generate optimal profit might be a substantially higher number in peak season than in the rest of the year. Changing margins and updated product pricing are also likely to have some effect, because they influence available margin and/or conversion rate. Want to learn more tips to elevate your marketing campaigns? Check out our blog here.
Assuming your campaigns are profitable, additional investment in the program is a good thing provided that investment continues to grow profit. This is why we advise an essentially unlimited budget: you should be free to spend the amount that will maximize your profit. If the additional spend isn’t producing profit, or if it’s producing less profit, pull back on your investment. If profit continues to grow, keep investing!
The flexibility is the beauty of this strategy—you can (and should!) spend the amount that works best for your business.
(Note that this will put your strategy at odds with many of the bigger PPC agencies. Many require minimum spend thresholds, or will tie their fees to your ad spend. In either case the agency is incentivized to keep your spend high regardless of the outcome, preventing them from acting freely in your best interest!)
2. Let Your Bidding Do The Work
We see a lot of accounts with PPC budgets tied to individual campaigns. On a day to day basis, bidding (especially as part of an intelligent campaign segmentation strategy) should drive your overall budget. This ties directly to the strategy above: if the program is profitable, additional investment is desirable assuming that investment will continue to drive profit. The same goes for individual product groups or ad groups: if they’re creating profit, continue to invest. Assigning arbitrary budgets to campaigns can limit campaigns that have room to grow while driving too much spend to ad groups that aren’t producing as much.
Shared budgets ensures spend can be distributed according to the bids for each campaign or ad group – no guessing how much each campaign will spend! Raising bids for profitable ad groups will, over time, allow them to tap a larger share of the pool, while lowering bids for unprofitable ad groups will limit spend to them. If you’re employing a profit-driven bidding strategy, and adjusting bids regularly to maximize profit, the rest will sort itself out. For a detailed look at how to bid on Google Shopping click here.
3. What Works Best for Your Business is Best for Your PPC Budget
Of course, we’re not suggesting you fly totally blind! Start with a reasonable shared PPC budget. If overall, your program was profitable, you can begin with the same level of spend as you had previously. Then, watch the campaigns closely for the first few days. If you are “limited by budget” check to see if you can make some adjustments for profitability. If you’ve adjusted for profit and you still need more funds, raise your PPC budget! In a profitable program, the investment will return to you.
You can take a very incremental approach to this. Just keep in mind that campaigns that are limited by budget can’t advertise as effectively, so you will see some impact on overall sales.
Of course, we know sometimes you need to know how much you plan to spend, for overall budgeting purposes. A profit-driven strategy can help you with that, too!
Check out our ad spend forecast guide, which teaches you how to analyze your previous spend, determine maximum profitability, and forecast the spend needed to make it happen. This analysis can help you ballpark how much spend you need to maximize your profits. (Note that this analysis works best for relatively small changes and isn’t really advisable for drastic improvements. If your campaigns are relatively well-run it can help give you an idea.) Predict your future ad spend here.
So there you have it! The best PPC budget is really…no budget at all. The real key is to know when additional ad spend is a good idea—and when you need to cut back. The rest will take care of itself!