Understanding the link between the budgets, conversions and Cost per Acquisition can impact the PPC campaigns for your company.
Basic Rule of Engagement
Budgets are tough to set, especially in new campaigns. Having too high or low a budget can lead to wasted spend, machine learning issues, and other account performance hiccups.
If you set a daily budget for your ads, the ad network will average your daily spend across 30.4 days. This means the ad network can spend up to 200% of your daily budget on any given day.
If you’re looking for a flexible budget that allows some fluctuation, monthly and lifetime budgets may be for you. Monthly budgets allow more spending during the last week of the month, and lifetime budgets allow for fluctuation within a given time period.
Your cost per acquisition (CPA) is determined by the conversions you designate as “in-conversions”. It’s possible for this number to be spiked by including too many conversion actions, or not enough.
Secondary conversion actions won’t be factored into the reported CPA or smart bidding.
Impact of Budget on CPA (Cost per Acquisition)/Conversions
Once you understand your costs, you can focus on the important numbers: impressions and clicks. CPA and conversion rate tell you if the sales team/site is closing a deal or not.
You can then focus on quality or volume traffic.
If your budget cannot support all of your objectives, you will have to choose which ones are more important to achieve within your budget.
Budgets should be able to support at least 10 clicks in their day as a 10% conversion rate is really good for search. The easiest way to see if you have enough budget is to look at impression share lost to budget.
If the budget is too small to support enough clicks, the conversion rate will not be triggered and CPA increases. Increasing your budget doesn’t always lead to a decrease in CPA. If the quality of your traffic is poor, it doesn’t matter how much fuel you pour on it.
The best time to start a campaign is in the first 60 days. Having a slightly larger budget than normal during this time period can lead to statistical significance on the quality of your traffic.
This way, budget adjustments are based on scaling for conversion volume as opposed to troubleshooting intent.
When to Change the Budget vs When to Change the Channel
When budget is too low, PPC may not be the channel to use. A lower budget will result in higher costs per click (CPC), which might make it more expensive than other channels.
If you have a large budget for your awareness campaign (social targeting, landing page visits, video, etc.), it might also have higher CPAs due to the lack of transactional focus.
Pointers when limited budget is the issue:
- Top of page impressions share is consistently below 40%.
- Average CPC exceeds 10% of daily budget.
- The campaign struggles to spend the budget consistently
Pointers when the channel is the issue:
- Lead Quality is poor
- Increasing the budget did nothing to help CPA
Final Thoughts
Your PPC budget should always be well decided and should be in sync with your business goals and SEO strategies. For deciding such budget you will need an expert advice from a digital marketing agency of repute. AI Advertisement would surely work for you to help your business grow.
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