Setting Your AdWords Budget
How should you determine your AdWords budget?
For a new AdWords advertiser, determining how much you need to spend on AdWords to be successful is a very difficult question to answer because you have no past results to base your decision on. Is $300 per month enough? Is $3000?
First of all, for you AdWords beginners, you are probably used to thinking about your advertising budget on a per month basis. AdWords currently only allows you to set a daily budget and not a monthly budget though I have a feeling that may change in the future. This is not a problem, you just need to divide your monthly budget by 30 for most months and that will give you your daily budget.
So at what amount should you set your daily budget if you have never used AdWords before and have no idea of how much each click will cost you or how many clicks per day you might receive.
I have helped hundreds of advertisers create their first AdWords account and have developed a process that has helped me to set a solid daily budget starting on day 1.
I will use an example to help illustrate my process. I have a friend John who paints houses for a living. John has decided to start a Google AdWords campaign to advertise his services in Chicago but he has no idea how much money he should budget for his advertising. He can’t afford to over spend but he wants to spend enough that he has a good chance of getting some new customers.
First Things First
The first thing I would tell John to do is to open up the Keyword Planner in his AdWords account. He then types in the term house painter, and set his targeting to Chicago. He will then select the tab that is labeled keywords suggestions and put this list in descending order of suggested bid and his results will look similar to those pictured below.
John now has some data on which to estimate his AdWords cost. Once her runs AdWords for a while he will have more accurate data but this is a place to start.
You can see that the term house painter has been searched for about 20 times per month in Chicago over the last 12 months. Unfortunately, Google was not able to suggest a bid for this keyword so John will have to use the suggest bids for some of the keyword ideas that were suggested by the Keyword Planner. John ordered the keyword ideas in order to bring those that had the highest suggested bids to the top. John now knows that clicks on his ads will probably cost in the neighborhood of $12.00 each. He can also see by the number of monthly searches that he has the potential to receive 1-3 clicks per day depending on the number of keywords he bids on.
Using the numbers John obtained from the Keyword Planner, John can estimate 3 clicks a day at $12 per click. John has taken a lot of the guess work out of setting his budget. John can now see that a budget of $36 per day should give him the potential for at least 3 clicks per day.
Things to Consider When Setting Your Budget
Remember, this is just a way to find a starting point. You will need at least 100 high quality clicks before you will have a good idea of how your AdWords ads are working for you. John would need to try and track how much new business he received from clicks on AdWords. If John spent $36 per day for 30 days that is $1080.00 meaning he would need to bring in at least that much in new business to make his AdWords profitable. If John spends $1200 dollars for his first 100 clicks but only does $1000 in business from those clicks he will have to rethink his AdWords strategy.
If you use this process to come up with a daily budget and that budget is more than you are comfortable spending you should lower your daily budget. I suggest keeping your bids higher and focusing on the most relevant keywords. In my opinion, if John could not afford $1080 per month he should focus on the same keywords for the $12 per click but maybe set his budget to receive 1 click per day. Don’t start off by trying to get more clicks for less money. Stick with higher quality clicks. You can always build up quantity once you have proven results.