How to define how much to invest in an Adwords campaign

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A very common question before you start investing in Google Adwords is, “how much should I invest in my campaign?”

To go beyond the “it depends”, as this is an applicable answer to almost everything in life, here are some well assertive ways to estimate the initial values ​​needed for a good return.

The following alternatives serve both to leverage B2B business and for B2C, regardless of segment.

Investment based on conversion rates

In this way, the first step is to define how many clients you want to generate with the campaign. Defined it is time to know your conversion rates.

Campaigns aimed at a direct conversion (a sale) have a single rate given by the ratio of the number of visitors who came to the site by the number of closed sales. For campaigns that represent an indirect conversion, or a conversion in which the result is a Lead and not a client, the path is longer. In general, Leads are business contacts of potential customers.

First it is necessary to know the conversion rate of the Landing Page for which the user will be directed at post-click. With the percentage of people that turn the page, it’s time to find out what the conversion rate of these Leads into opportunities. An opportunity is basically a contact that has ideal characteristics to buy your product and / or to demonstrate being very close to the time of purchase.

Following, we must know conversions opportunities customers. It is usually when the Lead becomes an opportunity that the sales team comes into contact with it. Therefore this rate also ends up reflecting the effectiveness of sellers.

With the number of customers who need to generate and the percentage of people who convert to each of the steps, it’s time to do a reverse calculation to know how many people take up your conversion page to close the stipulated sales.

Example 1

Objective:  100 customers

the Landing Page Statistics

  • Leads conversion rate: 25%
  • Leads conversion rate into opportunities: 30%
  • opportunities in customer conversion rate: 34%

To calculate how many visitors are needed, just apply the formula

[(Callers x TX conv. LP) x TX CONV. OPPORTUNITIES] x TX CONV. CLIENTS = DESIRED NUMBER OF CUSTOMERS

Simplifying the formula …

VISITORS (TX DE CONV. LP x TX CONV. OPPORTUNITIES x TX CONV. CLIENTS) = DESIRED NUMBER OF CUSTOMERS

Substituting the values ​​we have:

Visitors (0.25 x 0.30 x 0.34) = 100

= 0.0255 100 VISITORS

= 3.922 VISITORS

According to the conversion rates of the Landing Page, every 3922 visitors will have 980 Leads. Each lead 980, 294 will have opportunities. Every opportunity will have 294 100 customers, reaching my sales target.

Estimated investment

Now that we know how many visits we must also know how many clicks on my ads will be required (assuming that each click generates a visit).

The next step then is to select the keywords that will buy using the Planner words Google Key . For those seeking only a superficial idea of how much to invest, the simple average of the values of the keywords provided by the tool multiplied by the number of clicks required is enough. Another tip, if you have already Adwords campaigns earlier, is to use the cost per click (CPC) of these campaign to the account.

For the more detail-oriented, the journey continues to export the list of words to Excel. Because the words have different search volume and prices, it is natural that some will activate your ad more than others and will also consume more your money than others. The then output to a more assertive is expected to make a weighted average, as shown in the video below.

With the weighted average of the keyword, now we can multiply by the number of clicks required to get how much we need to invest.

Estimating profits

Contrary to what many think, it is possible to define how much you want to profit from each sale through a Google Adwords campaign. Therefore, it is necessary to understand the pricing of the product / service, knowing your profit margin and what percentage of that amount is intended for marketing.

To calculate how much to invest an eye on profitability, the steps do not differ much from already presented. We begin by setting a sales target, knowing the conversion rates, and how many clicks we need to buy. The difference here is that to be precise on investment and achieve the desired profitability is necessary to establish a Cost per Click (CPC).

Look at the example step by step:

Example 2

I have a product that costs US $ 500 and 10% of this amount is intended for marketing. Goal:  Sell 100 units

Value for investment

The sum of the values of the units that want to sell is R $ 50,000. Considering then that can invertir 10% of this amount in marketing, I have a budget of R $ 5,000 to advertise

conversion rates

  • Leads conversion rate: 25%
  • Leads conversion rate into opportunities: 30%
  • opportunities in customer conversion rate: 34%

As already shown in Example 1, with such precise conversion rates take 3,922 visitors to my page to be able to sell 100 units of my product.

Whereas every click on my ad generates a visit, I need 3,922 clicks. Whereas have $ 5,000 to invest and dividing that value by 3922, I have the most I can pay per click is US $ 1.27.

Consume only this value with advertising already guarantees the expected profit.
However, should you set a maximum CPC of
US $ 0.50 , the profit margin on the sale of 100 products will be increased in R $ 3039.00.

With the maximum value per click established, the next step is to select keywords that are appropriate to this CPC.

Investment in branding campaigns

The paths above work very well when it comes to campaigns focused on selling products and services. However, when the goal is branding or just take visitors to a site factors to note are others. Basically we should identify the potential universe for display ads and stipulate a percentage of overall spending will reach.

We can do this by identifying the amount of IP’s or devices that connect to the internet in a particular region. The amount of IP’s can be found by segmenting the display location of the ads at the time you create a campaign in Adwords.

Another option is to find the amount of people interested in your product, viewed in time to target an ad group for campaigns of Google Adwords display network.

Finally we analyze the amount of searches carried out by selected keywords on the Google Keywords Planner.

Another possibility is to also start a campaign with a minimal budget and analyze the payoff. Possession of the first results, simulate larger investments.

Is that you? Know otherwise stipulate how much to invest in Adwords ? Tell us in the comments.