How Much to Invest in Google Ads?

A quite common question I get before starting Google Ads campaign is: “How much should I spend in my campaign to get good results?”

Well, it depends. It depends on the objectives of the campaigns, stage, industry competition, and situation of the company.

However, taking that into account, you must analyse the type of business you are doing.

• Are you starting?
• Does your business have a defined marketing and advertising budget?
• Already have a stream of customers, and you want to increase the leads or sales volume?

Based on your answer to above questions you can have a better idea how much you need to invest in Ads.

Try at least 30 days

This is a very personal recommendation. If we consider a start-up company with a low budget, I recommend running Google Ads for at least 30 days.

I recommend this since the behaviour of users in different sectors fluctuates a lot from week to week and sometimes from month to month.

A campaign running for 30 days will allow you to do a better analysis and your results will enable you to make a statistically significant conclusion.

You can start with a low budget at first, analyse the results of your campaigns and gradually increase the budget once in profit.

The most “common” strategy about this is to raise the budget for those campaigns that are in profit and decrease or pause those are not.

The Disadvantage of Investing Very Little

One of the problems of funding too small is that the results will take longer to arrive. You’ll have fewer impressions, clicks, and conversions, and this will slow down your results analysis.

When you invest very little, you may not notice “growth” and that is why it is sometimes difficult to continue.

Investment Based on Conversion Rates

In this way, the first step is to define how many clients you want to generate with the campaign. It’s time to know your conversion rates.

Campaigns aimed at a direct conversion (a sale) have a single rate given by the ratio of the number of visitors who arrived at the site by the number of sales closed. For campaigns that represent an indirect conversion, that is, a conversion in which the result is a Lead and not a customer, the path is longer. In general, Leads are business contacts of potential customers.

First, you need to know the conversion rate of the landing page to which the user will be directed in the post-click. With the percentage of people turning the page, it’s time to find out what the conversion rate of these Leads is on opportunities. An opportunity is a contact that has ideal characteristics to buy your service or product, and that demonstrates to be awfully close to the moment of purchase.

Next, we must know the conversions of opportunities in clients. It is usually when the Lead becomes an opportunity that the sales team contacts the prospective client. Therefore, this rate also reflects the effectiveness of the sellers.

With the number of customers, we need to generate and the percentage of people who convert in each of the steps, it’s time to do a reverse calculation to know how many people to bring up your conversion page to close stipulated sales.

Example

Statistics of Landing Page

Goal:  100 clients/month

• Click Through Rate: 25% (visits site from ads)
• Leads Conversion Rate on Opportunities: 30% (fill up the form)
• Opportunities Conversion Rate on Customers: 34% (becomes customer)
• To calculate how many visitors are needed, simply apply the formula

To calculate how many visitors are needed, simply apply the formula

Visitors = 100/(0.25 x 0.30 x 0.34)

Visitors = 3,922

According to Landing Page conversion rates, every 3,922 visitors will have 980 Leads. For every 980 leads, I will have 294 opportunities. Every 294 opportunities I will have 100 clients, reaching my sales goal.

Estimating the investment

Now that we know how many visits we need, we also know how many clicks on my ads will be needed (assuming each click triggers a visit).

The next step is then to select the keywords that we will buy using Google Keyword Planner. For those who are just looking for a superficial idea of ​​how much to invest, the simple average of keywords CPC (cost per Click) ​​provided by the tool multiplied by the number of keywords is enough. Another tip, if you’ve previously done Ads campaigns, is to use the Average Cost Per Click (CPC) of these campaigns to make the account.

For the more detailed, the journey continues to export the list of keywords to Excel. As keywords have different search volumes and CPC, it is natural that some will activate your ad more than others and consume more money than others. The output then to a more assertive forecast is to do a weighted average.

Average CPC = total cost of CPC / No. of Keywords

Weighted Average CPC = Total of Each CPC x impressions / Total Impressions

(Note: Google Keyword Planner will show “Top of the bid High & Low range”. Chose one that suits your objective).

With the weighted average of keywords CPC, now we can multiply by the number of clicks needed to get how much we need to invest.

Depending on your industry, location, and competition, keywords can cost as low as a few cents or as high as a couple hundred dollars. Not every keyword will have same CPC. You can test different CPC for each keyword but keeping the Average CPC. One keyword can set at $0.50 and another one at $2.04

Assuming your Average CPC $1.27 then

Your Google Ads campaigns investment will be $4980.94 (3,922 x $1.27) per month.