Calculating Your Costs When Starting on Pay Per Click Advertising (PPC) in Sydney

The time has come to begin creating budgets for your marketing channels in 2017. If you’re new to PPC (pay-per-click) advertising, you’ll discover how difficult it can be to budget for such channels.

Making a budget for an Australian PPC campaign is complex, but it hardly has to be challenging.
The secret is to clearly outline your objectives. Clear objectives will assist you in making calculated choices after your PPC campaigns are operational.

Ask yourself the following important questions:

  • How much am I able to spend?
  • How valuable is a “lead”?”
  • What is my existing conversion rate?
  • How many leads will I require via PPC?

Are you willing to commit to turning PPC advertising into a mainstay of your ultimate marketing plan, or are you just testing out the waters?
Your PPC strategy is a major aspect of both your annual and monthly budget. As such, whether you are a newcomer to PPC or are well-versed in it, it’s worth taking a moment to determine if your expenses are paying off.

When planning your budget, the most vital thing to think about are your lead requirements. You must make time to determine several components of your leads, including:

  • Quality of leads
  • Target CPL (cost per lead)
  • Purchasing cycle
  • Visitor frequency
  • Geographic location in Australia (Melbourne, Sydney, Brisbane, Perth, Adelaide, Darwin, Canberra, and Hobart)

Calculating a Profitable PPC Budget: A Step-by-Step Approach

Businesses are using online marketing more than ever to increase traffic. If you are using a PPC campaign for the first time, figuring out the amount you need to spend can be complicated. With that, we have assembled this simple guide to help you come up with an appropriate PPC budget for your company.

There are 3 sections in this guide (which is Google AdWords-centric):

  1. Research Tools
  2. Figures to Be Mindful Of
  3. Step-by-Step Calculation

Section One: Research Tools

To begin, you’ll need to determine which keywords are relevant to what you are offering potential customers/clients. You’ll also need to figure out how much it will cost to get each new customer to your website.

There are several online keyword research tools available. Because we are calculating a budget for AdWords, Google’s Keyword Tool is what we will begin with.

The Google Traffic Estimator can help you assess how much, on average, each click will cost after you come up with a relevant keyword list.

A brief rundown of the Traffic Estimator:

  • Step 1: Choose your language, location, and network
  • Step 2: Enter your keyword(s)
  • Step 3: Enter your CPC Max (the most you will pay for each individual click)

The average ad placement for the Max CPC should range between 1.5 and 3.0.

Be mindful not to set your average CPC too high, as Google may offer an estimate for a first-position click, which might not be what you’re striving for.

Section 2: Figures to Be Mindful Of

Website conversion rate:

This amount determines what percentage of website visitors are taking actions you deem valuable to your company. Actions may include newsletter sign-ups, a purchase of a product or service, or submitting a contact form.

If you’re not familiar with this metric, St.George Web Design can explain things specific to your business.

For instance, if 1 out of every 10 website visitors submits a contact form, 10% would be the conversion rate for your website.

A lead’s average closing rate: The percentage of leads that convert.

In this example, if 1 in every 4 leads buys something, 25% would be your average closing rate.

Section 3: Step-by-Step Calculation

Let’s say a $15 average CPC was projected by the Traffic Estimator.
$15: cost each visitor (Average CPC)
We know your website conversion rate is 10%.

1 lead / 10 visitors = conversion rate of 10%
Because the 10 visitors will need to be paid for, your cost per lead will be $150.
$15 each visit x 10 visitors = $150 each lead

If your sales team can manage 100 leads each month, then your monthly online budget for advertising would be $15,000.
100 leads x $150 each lead = budget of $15,000
Once you have determined what your budget is, add in your average closing rate and determine the amount of leads you could convert into sales.

100 leads @ 25% closing rate = 25 sales
Last but not least, determine your amount of potential revenue. In this example, every sale is worth $7,500
25 sales x $7,500 = revenue of $185,000

By making these calculations, you’ll be able to determine specific figures and understand your campaign better, which will help you determine what you’re leaving on the table. Upon making the required adjustments to your campaign, you can improve your ROI substantially.

Besides ongoing optimization—which is necessary if you want the best results from your budget for paid searches—there are alternatives you can also use. Facebook, Bing, and LinkedIn all offer paid advertising options that can be just as effective as your Google PPC campaign is (depending on who and where your target market is).

About the author

Hi, my name is Marcelo and I’m a local SEO consultant and web designer in Sydney. I’ve been involved in web design and SEO for over 16 years and in that time I’ve ranked countless client websites, as well as my own business websites. I currently live in Connells Point, Sydney – St George NSW and it’s my objective to help local businesses to thrive. Whether you’re a plumber, dentist, attorney, carpet cleaner, builder or tradesman, I will help your businesses achieve an established online existence using my own proven formula.