Updated: Aug 17
January is a very 'exciting' time for PPCers - new year, new budget! If you were 'lucky', you may have spent December diving into forecasting models and are now implementing those brand-new numbers and tactics to make them work. Otherwise, you may be racing to get your budget in place.
The thing is that a new year brings those terrifying questions again - how much money do I need to bring as many sales as possible without wasting pounds? And.... how do I prioritise where that money goes?
The good news is that Google's latest movements can guide us to create optimal budgeting strategies.
First stop - Your Google Ads Account Structure
A good account structure has always been vital for budget optimisation. A wrong account structure can waste your budget, while a correct one can make the most of it (your budget).
As discussed in the How to Structure Your Google Ads Account in the Age of SMART Bidding, SMART Bidding is sifting how we structure and manage our PPC accounts. Our structure should leverage the number of signals that Google needs to determine intent and bid accordingly. In the Age of SMART bidding, consolidation is the way to increase these signals and maximise returns.
Return on Investment (ROI) evaluates efficiency by relating revenue and costs. Mapping out our structure and grouping our campaigns according to their ROI can ensure optimal efficiency.
Not all of our products/services have the same revenue and expenses, so we want to keep this in mind when calculating their ROIs. A common and easy way to calculate it is revenue minus cost divided by the cost. By grouping our products/services by their ROIs, we can allocate the budget and bid accordingly to their potential. We can put the high ROI products under one campaign, the medium ones under another and the lowest ROI under another. Based on this, we can invest more in the increased revenue campaign and be extra careful with the lowest ROI.
Let's use a simple example to illustrate the idea: imagine your client sells holiday packages in Spain, covering a wide range of selling prices and provider costs:
High ROI 66.67%
Low ROI 25.00%
Medium ROI 50.00%
Fully restructuring your account may be outside your plans but ROIs can give you good guidance to go through some easy consolidations that can help you to allocate budgets and leverage your SMART bidding strategies.
Do you really need more budget?
Reducing your non-converting spending and reallocating the budget to profitable areas is one of the quickest and most effective tactics to improve your ROI within your current budget.
Likely, you are already actively pausing/reducing low-performance activity. However, it is worth reminding to look out for assisted conversions while implementing this tactic. Comparing a few different date windows can give you a better picture of the assisted value. Considering the length of your user journey flow, you may find some keywords triggering research worth keeping. On the other hand, a relevant keyword with no conversions may have only spent £10 when looking at a 30-day window but over £400 if you expand the window to 6 months.
When reducing or pausing low-performance activity, remember to revisit all the targets available - not just keywords and ad groups - but demographics and geographic targets. Reducing spend on a particular age range or pausing some specific locations can free up some of your budgets to be reallocated to an area with a better ROI.
Using ROI to optimise your campaigns
Depending on the granularity of your data, you can calculate or estimate very close ROIs for your targets and audiences. For instance, you can establish ROI per age range and location. This data can help you to develop bid adjustments and increase/decrease spending based on profitability. By doing some simple maths with Google data and your client's data you may find that London and Manchester have the highest ROI while Leeds has the lowest. You can amend bid adjustments based on these findings instead of just using the volume of conversions/revenue.
Keep measuring and testing
As much as we want to control our budgets (and as much as the finance team wants a fixed budget), we have to keep it quite flexible and open to changes. Many factors can come into play like pricing changes, seasonality, competitors, the state of the economy…..
Monitor your performance concerning your ROIs and keep revisiting your revenue, margins and costs to keep your budget aligned with your final goals.
Staying on top of new features, case studies and techniques can also help to provide you with ideas to test and improve your ROI. To ensure that you are alerted to when more detailed & implementable pieces of content like this gets released, subscribe to our weekly newsletter to get PPC news that will unleash your true PPC potential.