How Much Should You Spend On Pay Per Click Advertising?

Key Budget Elements For Good Pay Per Click Advertising

In order to work, pay per click advertising needs a budget. Money is the fuel that drives keyword bidding, customers and conversions. Many business owners ask me the question, “How much does PPC cost?” “How much should I spend?” It’s a simple question but not always an easy answer. Since there are many factors that go into a monthly PPC budget, allow me to cover some key points.

Pay Per Click Advertising

Below are the factors when setting a PPC budget:

  1. What’s your industry? This is critical because the average cost per click for one industry is completely different than for another industry. The average cost per click for the keyword phrase, “real estate agents in Los Angeles” will be higher or lower than the keyword search phrase, “house painters” or the search phrase “cardiologists near me.” Because each industry has more or less competition in a given geographic area, this could impact the cost per click. Professional categories such as doctors or lawyers will usually be more expensive than general contractors but that can vary also. A good digital ad agency will do the research plus give you budget recommendations.
  2. How big is your target market?  Targeting just three to five local cities may have a difference cost per click than targeting the entire US and Canada. Your business may be local or national and that makes a difference. Again, the number of searches, the competition, and the geographic range impacts the cost per click of various keywords. A wider net will catch more fish but will cost more money. That’s not a bad thing just reality.
  3. How much is a customer worth to your business? For example, if your average customer brings in $350 in revenue and $100 in profit, you now have a break even benchmark for ad spend. Let’s say you spend $2,000 per month on pay per click advertising. You need 20 new customers to break even on your ad spend. Any additional customer after that 20 is profit.
  4. What Cost Per Lead (CPL or CPA) do you need? Customers don’t just “show up,” so to speak. In these digital days of winning the attention battle, you have to pay to play. Again, going back to the $2,000 per month PPC ad budget, if you got 35 leads that month, your cost per lead would be $57.14 per lead. Then, let’s say your magazine ads are costing you $84 per lead. It’s a no brainer that your lowest cost per lead sales funnel is your best advertising investment. The lower your lead the higher your profit margin per customer, provided you turn that lead into a sale. PPC bring the lead, it’s up to you to close and retain that customer.
  5. Don’t forget about brand awareness. Brand awareness, or impression share, is the starting point for PPC advertising. By impression share, it means the percentage that your ads show when a potential customers searches for you product or service. Impressions are free and it’s a great tool to expand your brand awareness. For example, if you ads are showing up 80% of the time people are searching for your dental implant practice, then this significantly increases the chance that a potentially new patient with the intent to call, will click on your ad. If your ads are only showing up 40% of the time, then chances are your clicks, if any, will be minimal. As Woody Allen once said, “90% of success in life is showing up.” The same goes for pay per click ads. They have to show up, and show up near the top of the page (both desktop and mobile), on a regular basis for your ad campaigns to be successful.

Remember, advertising is a cost of doing business. It’s an investment. Great pay per click advertising is based on a plan, not panic. Stay committed to consistent and regular advertising. It will pay for itself over time. Patience plus time plus data will get results.

Don’t scrimp on your budget. Low balling equals less leads. More is better. It gives your digital ad agency more flexibility to both beat your competition and increase your brand awareness and thus your impression share. Pay and you show up. Be patient and you get rewarded. Combine both these attributes and it’s plan for success. Set your self up for success with a strong budget plus solid account management. A well managed PPC account maximizes your dollars, runs efficiently, and creates more sales. Your bottom line and your customers will thank you!

Need help with setting a PPC budget and with pay per click advertising?  Please contact our agency today.

Stuart Atkins


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