The most common question I get from new clients (after “How much should I spend on my PPC campaign?”) is “Where should I spend it?”
Over the years, we’ve found most clients adopt one of four strategies when divvying up their PPC campaign budgets (with some overlap between the four):
- All-in-One Pot Strategy
- 80/20 Strategy
- If/Then Strategy
- Monthly Test Budget Strategy
1. All-in-One Pot Strategy
Clients tend to be most familiar with Google Search Network ads and often want to start their own campaigns there. They like the idea of focusing campaign efforts on active searchers (people looking for products or services via Google) instead of passive searchers (people who come across ads while doing other things).
Many clients won’t consider extending their campaigns to other channels, such as Google Display Network and AdWords for video, until they’ve exhausted all possible keyword combinations in Google Search Network.
The problem with this strategy is that it limits results. We find that even tentative steps into other channels can often yield significant returns, which brings us to the next strategy:
2. 80/20 Strategy
In this strategy, clients put 80 percent of their budget to Google Search Network and the remaining 20 percent to Google Display Network and/or video ads.
In essence, this means 80 percent of our clients’ budget goes toward active searchers, and the remaining 20 percent goes towards passive activities, such as brand building and creating awareness via Google Display Network and video.
Almost invariably, we find that when this additional 20 percent is applied to passive avenues, active avenues also experience a lift—and sometimes a substantial one.
For example, one of our clients had a $10,000 monthly budget to spend. After covering all angles on Search Network, we found ourselves with $2,000 of uncommitted budget. With the client’s permission, we put that $2,000 into Google Display Network, and consequently, the client experienced a HUGE lift in their Search Network account.
Why does putting money into Google Display Network and AdWords for video improve performance of Search Network? Perhaps clients get a lift from branding or expanded reach. Or perhaps Google gives them a silent bump as a reward for spending more money. We can only speculate—but we do know that it often works!
This is why we encourage clients to move from an “all-in-one pot” strategy to a “80/20 strategy” whenever possible.
While the 80/20 strategy works well for many clients, it does have a downside. Because it places an upper limit on PPC advertising budgets, it can also limit results. Many businesses experience ebbs and flows in their business throughout the year, and these ebbs and flows are reflected in PPC campaigns. One month we may get a huge number of conversions. The next month—not so many.
By placing budget limits, clients may also limit their results during those hot months—results we might not be able to make up during the slower months.
Which leads us to our next strategy:
3. If/Then Strategy
“So, Pauline,” you’re thinking to yourself, “are you suggesting we give you an unlimited budget? Are you crazy?”
Well, yes. And no.
We’re not asking for a blank check. But many of our clients (the majority, in fact) do give us permission to spend more, sometimes much more, as long as we’re meeting specified revenue-spend ratios (i.e. we’re achieving a minimum percentage return on our clients’ spend). After all, if we’re getting lots of conversions—conversions that generate more revenue than what we’re spending on advertising—then limiting the budget also limits their revenue.
If we fall below the specified revenue-to-spend ratio, then we’re locked back into a fixed budget until we can find a way to improve the ratio.
If you really want to maximize your return, then the if/then strategy is the way to go. And after all, if you’re investing in a PPC agency to manage your online advertising, shouldn’t you maximize your return?
4. Monthly Test Budget Strategy
One disadvantage of the preceding strategies is that they don’t allow for much innovation. Some of our clients recognize this and give us a monthly test budget— which can range anywhere from $100 to $1000 or more—to experiment with.
If you’re at all familiar with Google AdWords, you know it’s continually evolving. Google frequently introduces new channels and new rules. Clients that are willing to let us try out some of these new opportunities (even on a small scale) can often uncover new ways to reach potential customers and increase their conversion rates.
So as you think about where to spend your PPC budget, consider these four strategies. You may find that trying different channels, removing upper limits and taking advantage of new opportunities really pays off.