Insights from Sam: Can Businesses Spend Too Much on Google AdWords?
In our “Insights from Sam” blog post series, I ask Sam (our online marketing expert here at Followbright) a question or two about, you guessed it, online marketing. These questions are the most common ones about online marketing that we’re asked here at our web strategy agency. Each time, Sam shares his insights through simple, easy to understand responses. Enjoy!
Erin: A concept that is confusing to many new clients that begin working with us for their online marketing—and more specifically, for Google AdWords work—is that it is definitely possible for businesses to accidentally set up too much budget or have too much spend allocated for their advertisements. Can you explain?
Sam: Absolutely. There are a handful of ways to set up a budget and we can keep using AdWords as an example--display advertising and remarketing tend to come with some finite budget constraints.
With AdWords there is a number of ways you can set up a budget and it is really easy to set up a common sense daily budget that can get you in trouble.
One scenario is configuring a budget…not hitting your goals for a while and thinking, "Oh well, I'm going to go ahead and increase this budget because I'm not spending that money" or to set up bids with automated rules that manage to the top five positions for this keyword.
At that point all it takes is a competitor bidding up against you and those automated rules will bid up your keywords for you. Before you know it you are spending a lot more than you planned on.
It's not a product that is advisable to set and forget. It's a product that really needs some daily and weekly attention to mitigate that risk of having anything run away on you.
Erin: Then how can a business know how much money they should set aside or allocate for search engine marketing or particularly Pay Per Click ads each month?
Sam: That's a great question.
In many cases, unfortunately, businesses just go ahead and pick a round number. Often, at random. Something that “sounds right” to them.
They say, "we have $1,000" or "we have $5,000 we’ve allocated for search engine marketing”, and they bring that round number to an agency.
In some cases, that number is appropriate and maybe they arrived at that number by mistake or maybe there was a lot of research that went into it. But arriving at a round number can be a little misleading. Sometimes clients think that if they have a number in mind before they talk to an agency they are unlikely to be talked into some other number that they are not comfortable with.
Where a budget should really come from in an ideal situation is from business goals.
If a company has a business goal of increasing their sales by 25% or increasing their leads by 75% they should take that goal to their agency. Does the agency feel like that is possible and secondly, what type of budget would it take to reach that goal?
At their agency, an experienced online marketing account manager should be able to tell them that yes, we feel that's possible or no, we don't. Furthermore, here is the budget that we would assign to that business goal and here is where the budget comes from. It should be pretty clearly laid out.
User demand, cost per click and the agency’s cost of managing those ad campaigns can be easily estimated to help create an initial budget estimate.
Sometimes there is a little bit of negotiation between what the company can actually afford based on the cash flow, and what it's going to take to meet their business goals, but that’s the ideal way to arrange a budget.
If there is too much daylight between those two numbers then maybe it's not the right time to start up an advertising campaign.