For PPC campaigns to be successful, you need to have a budget and a plan and measure ROI too. In this blog, we'll show you how to calculate the ROI of your campaigns and make sure they're as effective as possible for your business.
Having a budget for a pay-per-click (PPC) campaign is essential to your ad campaign’s overall success. You’ll need to know exactly how much you must spend to meet your goals.
This blog will cover the importance of a PPC budget and a step-by-step guide to calculating your budget. Plus, we’ll cover how to work out your PPC ROI so you can easily evaluate the effectiveness of your campaign.
Having a maximum PPC budget for all your campaigns is crucial to ensure you stay on track with your strategy. A budget will help you set benchmarks and more effective goals for future campaigns. It will also help to ensure your PPC campaigns are aligned with your business’s long-term marketing plan.
Calculating your PPC advertising budget can be tricky, and numerous methods exist. This is the most straightforward method broken down into 5 simple steps.
Before calculating your PPC budget, you should have a goal in mind.
The 3 most common goals for PPC campaigns are:
When calculating your PPC budget, the first step should be identifying the search terms potential customers use to search for your product or service.
It’s best to first focus on keywords which have immediate purchase intent. These will usually have a higher conversion and click-through rate.
You can easily identify new keywords and search volumes using a tool such as the Google Ads Keyword Planner. Alternatively, you can use SEO tools like Ahrefs and SEMrush. These tools will also give a range of other data, such as click-through rates.
Check out our blog on PPC keyword research for more information on identifying keywords.
Tools like Google Ads Keyword Planner and SEMrush will also tell you the estimated cost-per-click for your keywords. It’s important to remember that these numbers are estimates based on historical data. Your actual cost-per-click may not always line up with the estimations.
Before you do your PPC budget calculations, you’ll need to determine how much traffic you need to generate to achieve your goal.
If you’ve got historical data, then this step becomes more straightforward.
First, you’ll need to know or calculate your website’s conversion rate. If you’ve got historical data, this should be simple. If not, you’ll need to estimate it using competitor data or industry averages. You can then calculate the traffic you’ll need to generate to convert the required customers to achieve your business goal.
This is easiest to calculate if your PPC goal is customer acquisition. You’ll need to know the number of customers you ideally want to acquire in the campaign and the length of time the campaign will run for.
To determine the amount of traffic or clicks you’ll need, you should multiply the number of customers you want to acquire by your website’s conversion rate.
Traffic requires = number of customers/conversion rate
If you want to acquire 200 new customers through your PPC campaign, and you know you’re websites conversion rate is 5%, you’ll need to do the following calculation:
200 / 0.05 = 4000
So, to acquire 200 customers, you’ll need 4000 clicks.
For most people, the most challenging part of calculating your PPC budget is the final calculations. Most PPC experts use a sequence formula. However, if you’ve followed the above steps, all you’ll need to do is one final calculation.
Now that you know the number of clicks you’ll need and your estimated CPC, you can calculate your budget. You just need to multiply the number of clicks you need by the average cost per click.
Maximum PPC budget = number of clicks x average cost per click
Continuing the example from the previous step, you would need 4000 clicks to acquire 200 customers. If your average cost per click is 50 pence, then you would need to do the following calculation:
4000 x £0.5 = £2000
So, you will need a maximum campaign budget of £2000.
This budget will be spent over the length of the campaign. For example, if you want to acquire those 200 customers over 1 month, you would have a daily PPC budget of approximately £67.
If, after doing these calculations, your maximum PPC is much higher than you thought it would be, you’ll need to go back and adjust the number of customers you hope to acquire. If you’re struggling with the restrictions of your PPC budget, then have a look at our guide on squeezing more out of your PPC budget.
After you’ve run a PPC campaign, you’ll likely want to calculate your return on investment (ROI). Luckily, calculating PPC ROI is quite simple once you know how to do it.
When people calculate PPC ROI, they are most likely actually calculating Return on Ad Spend (ROAS). This involves minuses the PPC cost from the PPC revenue and dividing that by the PPC cost. ROAS is usually shown as a percentage, so the figure must be multiplied by 100 to get the final percentage.
PPC ROAS = [(PPC revenue - PPC cost) / PPC cost] x 100
If your PPC campaign makes £2000 in revenue and costs are £1000. Then you need to do the following calculations:
(£2000 - £1000) / £1000 = 1.0
1.0 x 100 = 100%
So, your ROAS for this campaign is 100%.
If you’re struggling to know where to start with creating a budget for your PPC campaign or the results aren’t what you expect, we can help.
At Logica Digital, we have over 15 years of budgeting and running successful PPC campaigns. After an initial audit, our team of PPC experts will help you decide on the best PPC campaign type or strategy to grow your business effectively.
Our bespoke service is tailored to meet the needs of your business and includes Google Ads, Google Shopping, Bing Ads, and Social Media Advertising. Contact the team today to learn more about what we do and how we can help maximise your PPC return on investment!
We also offer a free digital marketing audit to help you understand your current PPC performance and how your current digital marketing strategy can be improved so you can start seeing real results!