How to Determine Your Test Budget

If you’re considering launching a Google Ads campaign, then you may be asking yourself, “How much do I need to invest to test this out? Is $100 enough or do I need thousands?”

It’s an important question and I hear it all the time from prospective clients. Unfortunately, this question is impossible to answer without further research. For example, we need to answer the following:

Which keywords will you be targeting and how much do they cost per click (CPC)?
What is the time frame for your test? Do you need to see results in weeks, months, or a year?

What is your sales process and typical sales cycle? Do customers buy the same day they search or does it take months before a purchase is made?
What are your typical sales conversion rates?

Find Your Target Keyword CPCs

In a Google Ads search campaign, you pay per click. That means you only pay Google when a prospect clicks on your ad. If your ad shows up in Google’s results 1,000 times, but no one clicks on it, then you don’t pay a penny. That’s why AdWords is sometimes called PPC, or pay per click advertising.

So if we’re estimating our budgets, we obviously need to know how much it’s going to cost when prospects click on our ads. And the exact amount you’ll pay depends on the keyword you’re advertising on. For example, if you advertise on the keyword, “coffee shop,” then you’ll pay a different amount than if you advertise on “mortgage broker.” Google estimates you’ll pay $2.90 for “coffee shop” and a whopping $13.76 for “mortgage broker.”

That’s a HUGE difference when we’re estimating budgets.

Now, you may be wondering how the heck do you find all the CPCs for keywords. It’s actually really easy because Google provides you with the Keyword Planner Tool. Search for your target keywords and the Keyword Planner tool will give you an estimate for how much each keyword will cost per click. Note that these are estimates so you may pay more or less.

Testing Time Frame

It’s important to realize that you need to go into an ad campaign with a realistic time frame in mind. As you’ll see later, the time frame will depend on your budget and it also depends on your industry. There simply may not be enough search volume for your target keywords to get leads and sales data in 1 month. For example, “mortgage broker” is searched 9,900 times per month in the US.

If 1% of the searchers click on your ad, then you would get 99 clicks from that particular keyword. Is it realistic that you would get a sale from only 99 website visitors? Probably not. Of course, you’ll be targeting more than one keyword. The goal here is to make sure there is enough search volume for your target keywords to achieve your goals within your time frame. Plus, if you have a longer time frame, then you can spread out your monthly budget across multiple months.

Your Sales Cycle

This step is easy. What is your typical sales cycle? If it’s over 1 month, then obviously you’ll need to test for multiple months to get decent data from a test campaign. If your customers buy within 1 day, then you know you’ll get almost instant feedback from the campaign once it starts.

Your Sales Conversion Rates
The final step before we can calculate your budget is to use your sales conversion rates. In my example above, we estimated that we can drive about 99 prospects to our website from the keyword “mortgage broker.” There are at least two more conversions that need to take place:

Prospect has to call, complete a webform, or visit your office after clicking on the ad

You have to close the sale

Let’s say your goal is to get the prospect to complete a webform to schedule an appointment. A reasonable conversion rate for lead generation like this might be 5%. So out of the 99 visits, about 5 will schedule an appointment. I’ll assume 100% will show up for the appointment, which is not realistic but makes this example easier. 🙂

Next, is your appointment to client close ratio. Let’s make the math easy here and say you’re sales conversion rate is 20% (and the sales cycle is only a few days) so you would generate 1 new client.

Estimate Your Test Budget

Alright, now it’s time to put all this information together to estimate your test budget. We already estimated we can generate 1 new client from 100 clicks on a targeted keyword. Plus, we know our example keyword costs $13.76 per click, so it’s going to cost about $1,376 to generate one sale.

That means we need at least $1,376 for our initial test to get a sale within about a month, based on the CPC, search volume and sales cycle. So if you only have $100/month to test, then it’s going to take about a year to test just one keyword. It’s possible you’ll get a sale more quickly, but it’s also possible it will take longer than estimated to get that first sale. In this example, I would recommend a budget of at least $2,000 to give this one keyword a fair shot.

As you can see, there are a lot of variables that go into estimating your AdWords test budget. Play around with the Google Keyword Planner to find your target keywords’ CPCs and search volume. Then run the numbers based on your sales cycle and conversion rates.

4 Warning Signs Your Google Ads Campaign Needs a Tune-Up

Think of Google Ads like owning a car.

What would happen if you ignored all the warning lights and skipped your scheduled service tune-ups?

Eventually your car would break down. Something would stop working and you would likely be forced to spend a lot of money to fix a problem that could have been avoided altogether if you had followed the recommended service schedule. In other words, it costs more money to ignore the warning signs and be forced to fix a broken car than it does to have your car regularly tuned up.

The same is true with advertising on Google Ads.

Google Ads Has No “Idiot Lights”

We take it for granted now, but cars were not always equipped with self-diagnostic tools and “idiot lights” to tell us there was a problem. Can you imagine if there was no “check engine” or “brake fluid” light? How would you ever know if your car needed a quick tune-up?

Most likely you would not know you needed help until it was too late and your car was stalled in the breakdown lane. Luckily all cars now come with plenty of warning lights so you don’t have to be a motor head to maintain your car.

But this is certainly not the case with Google Ads.

There are no “idiot lights” that illuminate red when your campaigns are underperforming to indicate you need a tune-up. Instead, you’ll need to do a manual audit. In this article, I put together a checklist that highlights some potential problems in your campaigns. Use this list to see if you have any flashing “red lights” indicating your campaign needs a tune-up.

Remember, it’s less costly to continually tune up your ads than it is to ignore them and later have to fix a completely broken down campaign.

The “Check Keywords” Light

The first warning sign is your keyword list in a Google Ads Search campaign. The “check keywords” light will illuminate red indicating a problem if any of the following conditions are true:

  • You’re using all Broad match keywords instead of Phrase and Exact match. This leads to poor Google Ads Quality Scores, low ad rank, higher CPCs and wasteful clicks on irrelevant search phrases.
  • You’re using some Broad match keywords with no Negative keywords. Again, this leads to poor Quality Scores, low ad rank, higher CPCs and wasteful clicks on irrelevant search phrases.
  • All or most of your keywords are in a single Ad Group. This leads to poor Quality Scores and low ad click-through rates because the ads are not 100% relevant for all keywords in the Ad Group.

If your “check keywords” light is on, then take action immediately to change your keyword match types, add negative keywords and restructure your ad groups. Until you fix this problem your ad campaign will struggle to get out of the breakdown lane.

Next, let’s move on to your ads…

The “Check Ads” Light

The second warning sign is your ad copy. The “check ads” light will illuminate red indicating a problem if any of the following conditions are true:

  • There is only one ad in any Ad Group. This means you’re missing an opportunity to split test to find better performing ad copy. By testing multiple ads at the same time you’ll discover which ads get a higher click-through rate and a higher conversion rate, which ultimately leads to higher Quality Scores.
  • You’re missing Ad Extensions. Every Ad Extension available should be used whenever appropriate to increase your response rates. Plus, missing Ad Extensions can lead to poor Quality Scores now that Google Ads uses Ad Extension performance to calculate your Quality Scores.
  • The ad copy does not match all keywords in the Ad Group. This leads to poor Quality Scores and low ad click-through rates because the ads are not 100% relevant for all keywords in the Ad Group.

If your “check ads” light is on, then take action immediately to add ads to your ad groups, set up all appropriate ad extensions and restructure your ad groups so that your ads are 100% relevant to all keywords in the ad group. By fixing your keywords and your ads you’ll ensure you’re targeting your ideal customers and driving as many prospects to your website as possible.

Next, we need to review what happens when your prospect “lands” on your website…

The “Check Landing Pages” Light

The third warning sign is your landing page copy and layout. The “check landing pages” light will illuminate red indicating a problem if any of the following conditions are true:

  • Your landing page is your homepage. This leads to low conversion rates because website homepages are too broad in scope. For example, homepages talk about every product and service offered and appeal to every different type of customer. In contrast, high-converting landing pages are laser-focused on one product or service and appeal to the subset of your prospects that would be searching the keyword you’re advertising on.
  • You’re using one landing page for more than one product or service. Again, this leads to low conversion rates because your prospect can get distracted or think your offer is not as relevant as your competitors’ offers that are more laser focused.
  • Your landing page is not 100% congruent with your ads. This leads to low conversion rates because your prospect does not find the same offer and the same product or service promised in the ad copy.

If your “check landing pages” light is on, then take action immediately to create a unique landing page for each product or service you’re advertising, and make sure your landing page copy is 100% congruent with your ads.

At this point, you know your keywords, ads, and landing pages are all set up properly to maximize your advertising investment. However, we’re not done yet. The only way to continually improve your campaign is to track your key performance indicators.

This brings us to the last warning sign…

The “Check Tracking” Light

The fourth and final warning sign is your conversion tracking. The “check tracking” light will illuminate red indicating a problem if any of the following conditions are true:

  • Conversion tracking is not set up for webforms. This means you do not know when prospects click on your ads and then complete a webform. Therefore, there’s no way to optimize your bids to increase leads and eliminate wasted ad spend on under-performing keywords.
  • Conversion revenue tracking is not set up for shopping carts. If you have an e-commerce website, then it’s possible to automatically send revenue data back to Google Ads so you can calculate your return on investment for each keyword. If this is not set up then again you can not optimize your bids to increase sales and eliminate wasted ad spend.
  • Website Call Tracking is not set up. This means you do not know how many prospects are calling your business after clicking on one of your ads. Therefore, you can’t optimize your bids to drive more calls.
  • Call Extension Tracking is not set up. This means you do not know how many prospects are calling your business using the phone number listed on the ad. Therefore, you can’t optimize your bids to drive more of these calls.
  • Offline Sales Import Conversion tracking is not set up. This means you’re not tracking sales and revenue from prospects that click on an ad, complete a webform and then convert to customers via phone or in-person sales. Therefore, you can’t optimize your bids to drive more offline sales.

If your “check tracking” light is on, then take action immediately to set up webform conversion tracking (and revenue tracking if you have an e-commerce website), website call tracking, call extension tracking and offline sales import conversion tracking.

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