The first question to ask yourself is not necessarily how much you want to spend on advertising on Adwords, nor how much you want to earn, but rather whether the process is profitable.
Unless you are, for example, on a specific strategy to work on your brand image, your notoriety or the launch of a product, if Adwords brings you €1,000/day but you spend €1,200 on advertising, you need to review your strategy
Analyze the CPC of the market
It is essential to analyze the average cost per click that you may have to pay for your Adwords campaigns and do a competitive analysis. Indeed, the more competitors there are in your market, the higher the CPCs will be.
The relationship between CPCs and the price of your offer
In general, the higher the price of your offer, the higher the CPCs will be too.
Your CPC Max (which is also your profitability indicator, we will come back to this later) will also be higher.
Because if your offer costs 2€ and you margin at 1€, you will not be able to pay more than 1€ for the click, at the risk of not being profitable.
If your offer costs 200€ and you margin at 100€, you will not be able to pay more than 100€ for the same reasons.
This is why, in general, CPCs vary according to the offer you offer. But don’t worry, clicks at 100€ are rare!
Calculate your CPC Max
If your margin for a product sold on your site is 50€, you can deduce that as long as the cost per acquisition remains below 50€, you are profitable.
Assuming a 2% conversion rate on a campaign (i.e. 2 out of 100 visitors will buy), your CPC Max is €1 (2% x €50). So, as long as you don’t pay more than €1 per click, you are profitable.
The questions to ask are therefore the following: why limit yourself to a predefined budget as long as your ROI remains positive? Why define a (limited) budget as long as you are profitable?
You’ll say, “And the agency fees, are they free?” – they’re not. Therefore, consider including management fees in your overall expenses.
You’ll also say, “It’s good to be profitable, but what I want is to make a profit!” – and you’ll be right. Here are some tips that will help you optimize and choose the best budget on Adwords.
Increasing your traffic does not necessarily require an increase in your budget!
Do not broadcast at any time or to anyone
Adwords offers us the possibility to analyze the results with great precision according to the places and times of diffusion. Visit https://instaon.io for more about Google Ads for business.
You sell umbrellas and your shop is located in the heart of the business district.
Your offer performs better during the week than during the weekend, and better in Ile-de-France than in Provence-Alpes-Côte d’Azur.
You may lower your bids by 30% on Saturday and Sunday, and exclude from your targeting those southern regions that are expensive and generate few conversions.
This is how you will gradually optimize the performance of your campaigns.
It should be noted that the optimization in terms of targeting and distribution schedule is only done with a sufficient history.
Don’t aim for first place at all costs
To some extent, the lower your bidding, the more traffic you generate.
You have a budget of 10€/day, your bid is at 2€ on average to broadcast in the 1st position.
This means that you spend your entire budget in 5 clicks.
You want to generate more traffic than these 5 new Internet users per day, and you decide to lower your bid to 1€ (you do it because you have previously done a study that tells you that by paying 1€ you are always at the top of the first page, i.e. in the first 4).
By reducing your bid, you lower in position and now appear in position 3.5 (i.e. sometimes in position 3 and sometimes in position 4).
But this time, you spend your entire budget in 10 clicks.
You have therefore generated more traffic, by reducing the cost of your bids.
This is why it is important to maximize the number of daily clicks on the most profitable keywords when using Adwords.
There are a multitude of tips and different digital marketing techniques to help you further optimize your Adwords campaigns. That is why it is important, before embarking on a project, to define an appropriate objective and strategy, at the risk of making mistakes that can sometimes be costly.
What you have to keep in mind is that a profitable system should not be hindered by a budget limitation (except by storage factors, suppliers, etc…), because there is no limit to the success and prosperity of your company!