Feeling overwhelmed by navigating Google Ads budgets? Let’s break it down! Unsure of the investment needed for impactful Google Ads campaigns? We’ve got you covered.
Confused by ad costs? Feeling lost in the pricing maze? You’re not alone!
Perhaps I can clear up a few points.
First, Google is not guaranteed money. At all!
It’s not a point & click solution, and you can’t just turn it on and off, either. Although I’d say given enough time and budget we can make Google Ads work for everyone, it’s not always easy or even practical for some.
That said, we have run dozens of local service campaigns and these are typically some of the absolute best performing campaigns in terms of ROI (for example, one of our smallest clients spends around $1500/mo on ad spend, pays a higher fee than you are paying, but they bring in over $10k/mo in business from this campaign).
This guide clears the fog, revealing common misconceptions and offering a formula for calculating your ideal ad spend.
Let’s crack the code!
Set Clear Campaign Goals
Vague goals lead to vague growth. Forget “more clients” – aim for laser-focused targets! Instead of “I want leads!”, ask “How many qualified leads from my ideal customer demographic in a given timeframe?” Specificity fuels success.
Consider Joe, the multi-service contractor. He wants PPC-driven growth. To get specific, he could ask:
- Target Service: Which service, like roofing or handyman repairs, should PPC prioritize?
- Ideal Client: Who needs his services most? Homeowners? Businesses? Location?
- Quantifiable Goal: How many qualified leads from these ideal clients in, say, Q1?
1) What is your most popular or profitable service?
Limited budget? Focus your fire! Don’t scatter your ads across every service like confetti. Choose your champion. Is there a specific area where your business shines, like Joe’s kitchen remodeling mastery?
Prioritize the profitable powerhouses, your true bread and butter. Leave the less-loved tasks behind and zero in on campaigns that attract your ideal customer and boost your bottom line.
2) Who is your best type of customer?
Smart businesses know not all customers are created equal. Take Joe, who specializes in luxury kitchen remodels. He’s discovered his sweet spot lies in affluent, mid-career homeowners (think 35-55) residing in high-end neighborhoods. Why?
They prize quality over price, seeking top-notch designs for their dream kitchens. It’s about understanding your customer spectrum and honing in on who truly fuels your success.
3) What is your close rate?
Imagine 10 incoming calls. For Joe, these aren’t just dials ringing, they’re potential partnerships brewing.
With skilled qualification, he finds 2-3 gems amidst the inquiries, translating to a conversion rate that sparkles at around 25%. It’s all about quality over quantity, and for Joe, that’s the recipe for sales success.
4) How many customers can I handle per month?
Hold on to “unlimited!” for a moment. Let’s get real: how much can your team handle comfortably each month, ensuring top-notch service?
Joe and his crew, for example, tackle 2-4 kitchen remodels with current capacity, ready to scale with increased leads. Be honest about what you can do now, and customers will trust you for it.
5) How much is an average customer worth?
Thinking about your break-even point for customer acquisition can be a game-changer. It’s like figuring out your “magic number”: how much can you invest in attracting a single customer and still net a healthy profit?
Let’s say Joe, a kitchen remodeler with solid margins, typically pulls $10,000 profit from a high-end project costing $25,000.
Knowing this, he can confidently set his maximum customer acquisition cost at $10,000 because anything higher wouldn’t generate profit.
Understanding your own numbers like Joe’s is key to making smart marketing decisions and ensuring sustainable growth.
6) How much is the average lifetime value of a customer?
Focus on long-term loyalty, not just immediate wins. Don’t just chase initial sales; think about the bigger picture.
Imagine Joe, not just securing a project, but becoming the trusted choice for future renovations and a source of referrals.
Building relationships like these can multiply your customer lifetime value, often exceeding the initial deal.
This shift in perspective helps set clear, ambitious goals that prioritize long-term growth over short-term gains.
Setting Your Goal
The first step to optimize google ads campaign performance is to have a well-defined goal. You want to know what you are trying to accomplish with the campaign.
- Is it branding?
- Lead generation?
Once you know your goal, you can identify the metrics that will best help you reach it.
One thing we’ve noticed with Google Ads is that the more ambitious you are, the less likely you are to achieve those results.
Therefore, you must set realistic goals and expectations from your Google ads campaigns. You can’t just expect a single campaign to make you millions of dollars in a month.
With defined objectives, we can laser-focus ad spend and track return on investment. (SEO keywords: objectives, ad spend, ROI)
Focus On ROI and not the CPC
Quantity over quality? Not quite!
True ROI lies in targeted leads, not bargain basements. Forget bulk buys on “lead flash drives” – those cheap thrills often fizzle. Instead, let’s focus on premium “high-intent” keywords, attracting prospects primed for your solution.
We shift the dial from mere lead count or cost to a laser focus: qualified leads ready to convert. By working backwards from your goals, we pinpoint the targeted ad spend that fuels optimal conversions and maximizes your marketing punch.
Factors Influencing Google Ads ROI:
The average ROI on Google Ads can vary widely across industries, businesses, and campaigns due to several factors:
- Industry Niche: Different industries have varying levels of competition and customer behavior. Some industries, like e-commerce, may have higher ROI potential, while others, like legal services, may require a longer sales cycle, affecting ROI.
- Campaign Objectives: The goals of your Google Ads campaign greatly impact ROI. Campaigns designed for lead generation may have different ROI expectations compared to campaigns focused on direct sales.
- Keyword Costs: The cost-per-click (CPC) for your chosen keywords can significantly affect your ROI. Highly competitive keywords often have higher CPCs, which can impact profitability.
- Ad Quality and Relevance: The quality and relevance of your ad copy, landing pages, and ad extensions play a crucial role in determining how well your ads perform and, consequently, your ROI.
- Conversion Rate: The rate at which users convert after clicking on your ads is a critical factor in ROI. A higher conversion rate can lead to a more positive ROI.
- Ad Budget: Your ad budget directly impacts the scale of your campaign. Adequate budget allocation is essential for reaching your target audience and achieving ROI goals.
Taking A Mathematical Approach To Ad Spend
It’s usually not profitable for you to spend less AND also pay for someone else to manage, which is why they are suggesting you spend at least that much. But ultimately your question is ‘does it make sense to spend this money’ and the data you need to answer that is:
- What % of people who hit your site ultimately convert today? You should have this in Google Analytics.
- How much volume do searches for home automation, tv installation, etc. have in your local region? You can find this in Google’s Keyword Planner.
- What’s the average CPC for those searches? Again, in keyword planner.
- What’s your average profit per job? If you tend to scope projects by job type (tv installation vs. full home automation set-up) then do the same here and pin a rough value.
Then it’s just a math game. Say your average job is $250 in profit, and you’re willing to do the work for only $50 in profit in order to scale up (and ultimately hire out). Then you’re setting a max spend of $200 to acquire that job ($200 for the job, $250 profit before ads, $50 profit after cost of ads).
Then look at your conversion rates and estimated CPCs. Say you convert 5% of your web traffic and the estimated CPC is $5. So you’d need to drive 20 people to the site to get 1 customer, so that’ll cost $100 ($5 x 20). That’s under your $200 max that we set above, so it’s likely profitable for you to do.
So you check the search volume and make sure you can get at least 20 of those searches, then hit go. If the numbers don’t work out profitably, then you don’t go and explore other avenues.
Ad Budget By Conversion Goal
Planning your ad spend based on lead goals? Smart move! Here’s a helpful formula to estimate what it might cost:
(Desired leads x Avg. cost per click) / Landing page conversion rate = Estimated monthly ad spend
Let’s see it in action:
- Lead goal: 20
- Avg. cost per click (CPC): $9
- Landing page conversion rate: 10%
Result: Around $1,800
That means roughly $1,800 could snag you 20 leads, averaging a cost-per-lead (CPL) of ~$90. Remember, these figures might shift during actual campaigns, but it’s a solid starting point.
(Stay tuned for optimization tips to take your results even further!)
Visualizing revenue potential?
Multiply your lead count by your expected close rate, then factor in the average purchase price.
For instance, with 20 leads, a 25% close rate, and an average purchase of $25,000, you could see roughly $125,000 in revenue.
Most businesses are seeing 10% – 20% drops in revenue and conversion year over year. People being at home forced to shop online made everything look amazing last year. Jewelry is a pretty competitive space and there seems like there are more brands in this space than even a year ago.
There are external factors that are going to cause your CPA, ROAS, conversions and revenue to change vs last year. However, the doubling of your costs would be worrying. What is the agency doing to combat this 2.5x increase in CPA?
We talked with a few jewelry brands this year and most are seeing competition and higher costs but none to the extreme your business is seeing. A lot of the other brands are investing heavily into brand building work this year, on top of driving performance marketing.
An important KPI for Sale campaign ads, is ROAS, which refers to Return Over Ad Spend and the calculation is “Revenue / Ads Cost”. Google doesn’t provide this metric by default.
Well, there is “Conversion Value / Cost” metric available but it doesn’t filter only Purchase Value so it includes other primary goal values as well.
Track your ROAS (Return on Ad Spend)!
The formula is simple: divide your revenue by your ad spend. In our example, $1,800 in ad costs generated a whopping $125,000 in revenue, a ROAS of 6,944%.
Talk about strategic success! Master ROAS with our free ROI calculator (link included) and watch your marketing investments blossom.
Increasing Profitability With Optimization
We take a cautious approach, setting initial bids beyond minimum estimates. Then, we leverage daily optimization tactics, in-depth keyword research, and competitor analysis to fine-tune campaigns in real-time.
Your daily budget should never be less than 1 conversion cost. You can always turn ads off after you get the conversions you need but you can’t expect to get more from less unless you’re already outspending your competitors.
Data is king – it shows us where to adjust budgets, refine targeting, and optimize bids for maximum impact. Ready to scale your campaigns? Here are some data-driven strategies to unleash their full potential…
Expanding Keyword Sets
Diversifying your high-intent keywords can be a game-changer! Instead of relying on a few top-tier options, a strategic mix can actually bring your average CPC down.
We’ve seen clients enjoy reductions of 10, 20, even 30% by tapping into different buyer intents.
Take Joe, for example. By targeting terms like “kitchen remodeling cost estimate” alongside broader themes like “kitchen remodeling ideas,” he captured various stages of the purchase journey. This spread the cost across a wider pool, bringing his average CPC closer to $6-$7.
Adding Negative Keywords
Think of Google Ads’ Negative Keywords as your “not-to-do” list of searches. They stop your ads from showing on irrelevant queries, even if they mention your target keywords.
Like in this example, ‘kitchen remodeling’ might trigger your ad, but adding terms like ‘DIY’ or ‘cost’ can filter out searches not looking for your professional services.
With precise keyword targeting, we can ensure our ads reach qualified audiences, leading to more efficient ad spend and better campaign performance.
Users that click on your listing and then bounce off will cause Google to think that your business is unrelated, hence the decrease in quality score and increase in your cost per click (CPC) which will overall affect your cost per conversion.
By testing different headlines and descriptions in our ads, we uncover which messaging resonates most effectively with target audiences.
This data-driven approach has been instrumental in reducing Cost Per Lead (CPL), but significant testing and analysis are crucial for optimizing campaigns and maximizing results.
As we collect more leads, we can refine our targeting by focusing on demographics and locations showing strong conversion rates.
This data-driven approach ensures we’re reaching the most receptive audience while optimizing campaign efficiency.
Landing Pages Tests
Optimizing campaigns after they gain traction unlocks hidden potential. We’ve seen CRO best practices boost conversions by 5-10% through offer, design, and landing page tweaks.
This post-launch fine-tuning is a prime opportunity to slash CPL and unlock explosive growth.
Benefits of Using Ad Extensions in Google Ads
With the competition on Google platform with other businesses, it’s essential that you stand out from the crowd. One way of doing this is to set up Ad extensions to give yourself more real estate in the search results, as this will help to make your listing look bigger so you can increase your click-through rate (CTR) as well as your conversion rate.
There are seven different Ad Extensions you could use for your advert.
- Sitelink – these send the user to specific pages on your website whether that’s your business opening hours or to a specific product or service you are offering.
- Callout – here you can promote offers to users, whether that’s free delivery or 24/7 customer service.
- Structure Snippet – highlight key aspects of the products or services you are selling. These are displayed under your text ad in the form of a header and a list of values beneath.
- Call – add phone numbers to your ad to get users to call you directly to improve your click-through rates (CTR).
- Location – make it easier for users to find your location by adding your address allowing users to find where you are located or the distance between the user and your business.
- Price – shows users examples of what you have to offer along with the pricing.
- Promotion – make your Ad stand out with special offers and sales to gain interest among users and encourage sales.
- Message – this takes the users to the SMS on their phone, which they can text your business asking for a quote for example.
How GREAT Guest Posts Leverages Google Ads
We do 3 packages depending on ad spend ranges. The first two are flat rates and the third is % of ad spend for big budgets:
- $499/month for a basic package and ad spend up to $2,000
- $899/month for a standard package and ad spend up to $7,500
- 15% of ad spend for an enterprise package and no maximum ad spend
The first two packages have limits on how many campaigns and platforms we’ll run. You also get more time and communication with your account manager with each package. Clients can also choose to be billed annually for 15% off.
I spent a lot of time on pricing and this, to me, seems like the simplest and most straightforward route. When I was researching pricing I saw a lot of over complicated pricing models which are a turnoff for clients.
Ditch the guesswork, amplify ROI. Craft smart PPC campaigns with:
- Laser-sharp goals: Know what you’re aiming for before firing a single ad.
- Data-driven decisions: Let metrics, not gut feelings, guide your ad spend.
- Continuous optimization: Tweak & test relentlessly to squeeze the most out of your budget.
- Scalability in sight: Build campaigns that grow with your success.
Forget chasing the cheapest clicks. Focus on driving profitable conversions. We can help! Check out our PPC management service and let’s get your ads working smarter, not harder.