The exact amount that will be spent on pay-per-click advertising depends on the nature of the campaign to be executed. As the name suggests, with the PPC campaign, advertisers have to pay every time someone clicks on it. It is the popularity of the keyword that will determine the cost you have to pay.

Below we have marked out a framework that allows you to calculate a realistic budget. This framework can be classified into two stages, namely testing and potential return on investment (ROI).

Stage 1: – Test

It is absolutely impossible to calculate the budget that will be spent in the initial stage. You have to test a lot of ideas and analyze the result to know which campaigns might work and which ones might not. As an exception, the profitability of certain campaigns can be determined at the initial stage. However, this happens in rare scenarios, when the level of competition for your target keywords is low. Explore, test and research your campaigns by investing a decent sum in this phase with no expectations of profitability.

A proper understanding of certain building blocks is vital before testing your campaigns.

Cost per click for target keywords: – The PPC model takes an approach where regardless of how many times your ad appears, you are guaranteed to pay only when someone clicks on it. The cost varies depending on the keywords and Google offers an estimate of how much you need to lose for each click. For example, the keywords “athletic shoes” and “body deodorant” have a CPC of AED 5 and AED 6 respectively.

Prepare a comprehensive list of keywords you want to test and use the Google AdWords Keyword Planner tool to calculate the ballpark estimate for each keyword. Please note that it is an estimate only and not an actual cost. There may be an increase or a decrease.

How long can the test phase last?

The mistake many PPC campaign managers make is restricting the testing phase. Although there is no specific time period for the testing phase and the referral amount that will be spent during the testing phase, it mainly depends on the industry and the keywords chosen. For keywords with a higher search volume, the results are visible in a short period of time. When the search volume is low, the testing phase is lengthened and therefore it will take time to obtain meaningful information.

Potential Sales Conversion Rates: – Come up with a rough estimate considering that 1 in 100 people will see the ad and click on it and another 1 in 100 people will become customers. Although it is only an estimate, in reality, your ad may generate more or less traffic.

How to come up with a test budget?

The first thing is to figure out the cost of the keywords to be tested. If you can convert 1 customer through 100 clicks, then the cost per sale must be inferred by dividing the cost per click by 1 percent. For a keyword that costs $ 5 per click, the cost of an estimated sale is $ 500.

Stage 2: – Potential return on investment (ROI)

After the testing phase is complete, the goal is to improve your AdWords ROI. Many have doubts regarding the tone of the investment to be made in the ROI stage. If you assume your ads are profitable and getting the most return, you can invest more.

Strengthening the quality of your ad copy is critical to increasing your ad quality score to lower your cost-per-click rate. On the other hand, it is equally important to focus on earnings per click. Earnings per click give an indication of how much your business can pay for each keyword. Your campaign is considered profitable when you pay less.

Once you identify the potential ROI, it’s time to create a conversion-focused PPC strategy for your business. And this should be very accurate and should have taken into account all the knowledge gained during the testing phase. The strategy thus developed must be in tune with the overall business objectives. And only then does it become meaningful.

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