5K members online now
5K members online now
Welcome to the Official Google AdWords Community
Find optimization tips and how-to guides and videos by the Google team, AdWords Experts and other industry experts
star_border
Top Contributor

Setting a Sensible Budget

Unless you are advertising for pure brand awareness, or to generate traffic that cannot be accurately measured in any way, your advertising spend should ultimately be measured against its returned, often referred to as the Return on Advertising Spend (ROAS) or, more often in AdWords as the Return on Investment (ROI).  In very simple terms this means that if your advertising is working as well as it can - and this includes your website - then what you spend should be governed by this ROI, not simply by what you can "afford".  I've tried to show this concept in the following diagram...

 

budget_flow_2.jpg

 

The only time the term "afford" should come into play is where a campaign is new and has no reliable data upon which to make decisions (shown above as the period of 2 weeks data collection).  Here you may have to consider any spend as "lost" since you cannot be sure of a profitable return but even here it is still important that the test is fair.  Throwing £100 at a Campaign for a fortnight (less than £10 a day) then announcing it a failure may miss the opportunity for a £200 a day Campaign to be a roaring success.  Success with AdWords is as much about exposure as it is clicks and it's important that any test captures a respectable proportion of the available coverage.

 

Imagine a campaign of putting flyers under car windscreen wipers in a large car park.  If you put flyers under only 20 cars in a 1000 car lot, and only do it once, your chances of sales are dramatically reduced from putting flyers under 800 car wipers and doing so 10 times a day.

 

Think about why your daily budget is what it is, what your measurable income is from AdWords, then consider if you shouldn't be making some changes.

 

about Jon Gritton

AdWords Management Consultant, a Google Partner, based in Dorset, UK, but working worldwide... I'm very proud of having been a Top Contributor for AdWords since 2006 and enjoy being able to help others improve and develop their AdWords usage. I now work primarily as an AdWords Manager & Consultant. You can read my eBook "AdWords Preschool", just search on Amazon.

Comments
Top Rank Guru
May 2013

Great Post bro  (Y)

Spoiler
 
sego
June 2013

Thanks Jon. Do you have any pointers on how you determine what is a long enough time period to gather useful data and what is a fair amount to spend on such a test?

Nick P
June 2013

Hi Cobnut

I'm new to Adwords and to be honest I'm finding it all a little confusing, though I am trying and understand the concept of what you are saying. If people are clicking then I'm happy to pay and have no budget limit.  However I am a bit confused as to what 'campaign' type would be best for me. I'm thinking of setting up every campaign type for say a period of two weeks and seeing which one performs the best, then I will delete the others. Is that okay to do? Would I be breaking any rules. Will the performance of each campaign type be clear for me to see the difference.

I would very much appreciate your advice on this. 

Many thanks

Annie P

 

Jon_Gritton Top Contributor
June 2013

@G Lange:  No!  It's really impossible to say.  If I'm honest, the figures I've quoted in the chart (2 weeks at 10 clicks per day per Ad Group) are just a "best average".  They should be enough for many businesses but they won't be appropriate for all.  Generally speaking when you're selling physical goods online, the higher volume, lower cost items should need a shorter period of testing than the lower volume, higher value items.  With high volume items you should be able to tell pretty rapidly - maybe even on the first day - how likely it is that AdWords can give you sales and whether it's likely to be profitable.  With lower volume items, particularly where they have a higher value, it can be a lot trickier because the conversion time lag could be very long.  For example, if you sell a product where your profit is measured in the thousands, two weeks at $100 a day could go by without a single sale and it might look like AdWords was a complete waste of money.  But then you might get a single sale worth $4000 profit on the 15th day that suddenly throws the Account into a Net profit.  It's a difficult juggling act; I'd actually say that setting the initial trial budget and period for testing is one of the hardest parts of AdWords.

 

@Annie.  You'll break no rules by having a Campaign of each type, but it's quite likely that one will perform much better than another and we could probably take a stab at what that might be if we knew a bit more about your business.  Why not ask this question over in the main Community and see what replies you get.

 

Jon

tatheer
June 2013

Annie P

 

 

Testing different type of PPC campaign is not against any rule. However experimenting them without having complete command will not be a good idea at all. I am afraid you will end up with a wrong conclusion. If you can share the industry, your product and services belong to and little about your target market, I can certainly give you expert opinion  

 

regards

tatheer hanif

PPC Expert

小凤 刘
June 2013

hello, my name is Annie, I need help from both of yours. Our company use Ads on google, but we didnot receive enquiry. I would like to know is that any worng with our website? Like website structure or keywords. Our website is wwwdotwzpimdotcom. I am really really thank you very much if you can give me some suggestion about out website.

小凤 刘
June 2013

Thank both of yours very much, I am a new staff in our company, and we spent much money on google ads. My boss give me much pressure. My friend say here can help me. I can ask foreign friends, maybe some difference between chinese and foreign people. Maybe in europe, our website style, structure cannot be accpeted. Anyway, it is not for business, as a newcomer, I need more help. Thank you very much.

LogicPro T
June 2013

Hi 

I'm new to Adwords and to be honest I'm finding it all a little confusing, though I am trying and understand the concept of what you are saying. If people are clicking then I'm happy to pay and have no budget limit.  However I am a bit confused as to what 'campaign' type would be best for me. I'm thinking of setting up every campaign type for say a period of two weeks and seeing which one performs the best, then I will delete the others. Is that okay to do? Would I be breaking any rules. Will the performance of each campaign type be clear for me to see the difference.

I would very much appreciate your advice on this. 

 

 

Labels