Navigating Google Ads budgets is crucial yet challenging, especially when you’re trying to push your company ahead in a competitive market. You’re probably here because you’re looking for effective strategies to maximize every dollar and drive substantial growth but are overwhelmed by what’s being thrown at you. Your team shares numerous campaign types, targeting options, and ad formats with you.
It’s a lot!
So, I wrote this guide to address that, offering clear insights on allocating your budget wisely.
I’ll delve into the intricacies of budget allocation, exploring proven strategies tailored to different business goals. From lead generation to brand awareness, I’ll uncover the key performance indicators (KPIs) essential for each objective and provide actionable insights to help you maximize the impact of your advertising budget. Recognizing your ambition to participate and lead in your industry, this resource aims to empower you with the knowledge to make informed, strategic decisions for your Google Ads campaigns.
Let’s focus on turning your challenges into successes, leveraging every opportunity to achieve the impact you’re aiming for.
How to Know If Your Google Ads Campaigns are Cost-Effective:
Step 1: Examine your key metrics such as Cost Per Click (CPC), Cost Per Acquisition (CPA), and Click-Through Rate (CTR).
Step 2: Benchmark your campaigns against industry norms. Leverage industry reports from reputable digital marketing platforms like Smart Insights or Databox.
Step 3: Benchmark your campaign performance with the historical performance of existing tactics.
Here are the things you want to see:
- CPCs and CTRs that are within the range of industry norms.
- CPAs align with your profit margins and marketing objectives.
Great! Now you have a starting point of what you should expect!
How to allocate budget strategically
Now that you know which Google Ads campaigns are more cost-effective than others, it’s time to improve your budget allocation. By targeting your spending on specific campaign types, targeting options, and ad formats, you can ensure that your ads reach your desired audience effectively. This focused approach helps you use your advertising budget efficiently, letting you adjust based on the data and insights you gather along the way.
Allocate Your Budget Based on Your Goals
Understanding your primary business Key Performance Indicators (KPIs) is key when deciding how to distribute your budget among different advertising tactics. These KPIs and their related efficiency metrics level the playing field, making it easier for you to compare different tactics. Here’s a quick guide to choosing KPIs based on your objectives:
- For lead generation, focus on Cost per Lead (or CPA) as your main KPI.
- Also, monitor Click-Through Rate (CTR), Cost per Click (CPC), conversion rate, and lead quality indicators like cost per Marketing Qualified Lead (MQL) or cost per sale.
- For online sales, prioritize Revenue or Return on Ad Spend (ROAS) as your key metrics.
- Additional KPIs include CTR, CPC, purchase rate, and Average Order Value (AOV).
- For brand consideration, landing page views, engaged sessions, and CTR should be your top metrics.
- Other important measures include Cost per New Customer, CPC, Cost per Thousand Impressions (CPM), and view-through conversions.
- For brand awareness objectives, focus on unique reach and impressions.
- Also, CPM, CPC, CTR, and the view rate should be monitored.
If your goal is driving leads/qualified leads:
- Start by determining your key goals or KPIs (Key Performance Indicators).
- These can be simple counts like the total number of leads, Sales Qualified Leads (SQLs), or deals you’ve closed, or they can be rates, like how much you spend on average to get a lead. You probably already have a target for the number of leads you need to succeed. If not, now’s the time to work it out.
- Calculate the average value of a successful closed deal.
- Calculate the rate at which website leads are turning into closed deals.
- If you take a look over the last 3 months and divide the total deals by the number of leads from your website, you’ll get this rate (expand to 6+ months if your customer journey is longer or you don’t have enough data).
- Multiply your close rate by the average value of a closed deal to get the estimated value of a website lead.
- Set a budget for your Google Ads.
- Think about how many leads you want per month and how much money those could bring in, then pick a budget that aims for the return on investment (ROI) you want.
- Determine how to divide your budget between campaigns.
- For lead generation, most of your Google Ads budget should be allocated to non-brand search campaigns & Performance Max Campaigns. The two pair well together to serve individuals throughout the marketing funnel, but with an emphasis on capturing existing demand: bottom-funnel users who are already searching for your product or service.
A great way to fully optimize your strategies is to use first-party data from a CRM so that your audience’s outreach is as qualified as possible. Adding display and video ads can work well, but only if you target people who’ve already shown interest in what you do, like those who’ve visited your website or are on your email list. If you can’t target these ready-to-buy audiences, it’s best to skip display and video ads to generate leads.
How you divide your budget depends on what works best in your industry, what creative materials you have, and how stiff the competition is. But a good starting point might be something like this:
- Google Non-Branded Search: 50%
- Performance Max: 40%
- Remarketing with Display or Video: 10%
You’ll likely run several campaigns in each category, so the next step is figuring out how to divide your budget among them. These decisions should be made based on your rate-based KPIs, like cost per lead or cost per closed deal. Start with an even split, or put a bit more into what you think will work best. Let each campaign run for at least two weeks to collect data, then shift your budget towards the ones that give you the most bang for your buck, lowering your costs per lead or deal. Keep tweaking your budget every couple of weeks to keep improving your results.
If your goal is driving online purchases:
- Start by determining your key goals or KPIs (Key Performance Indicators).
- These can be straightforward numbers like your total sales, how many transactions you’ve made, or the number of new customers. You can also look at things like your Return on Investment (ROI), how much you’re getting back compared to what you’re spending on ads or the cost for each transaction or new customer. Pick the most important KPIs for you and your team.
- Set targets for them, and start with a modest budget for your ads.
- Run your ads for at least 30 days.
- Check your actual results against your goals.
- Decide what to do with your budget.
- Better than expected? Increase your budget.
- If not, reduce your spending, tweak your ads, or reallocate where your money goes.
- Determine how to divide your budget between campaigns.
- Boost online sales or achieve a specific ROI from your ads? Put most of your budget into non-branded search campaigns and Performance Max campaigns. These strategies are great for grabbing the attention of people who are already interested in buying by showing your ads in search results and shopping results on Google. Performance Max campaigns also help pull in folks who are just starting to look around or are somewhat interested, getting them into your sales funnel.
- Including display and video ads can work well, too, but only if you’re targeting people who’ve already shown interest in what you’re selling, like those who’ve visited your site or put something in their cart or you have their email because they’re a qualified lead. If you can’t target these ready-to-buy groups, leaving display and video ads out of your plan for boosting sales is probably best.
How you split up your budget will depend on what’s worked in the past for your type of business, what ads you can create, how well you manage your product listings, and how tough the competition is.
But generally, a good starting point for your budget might look like this:
Google Non-Brand Search: 40%
Performance Max: 50%
Remarketing with Display or Video: 10%
Still stuck?
Start by dividing your budget fairly evenly, or put a bit more into the campaigns you think will bring in a higher return. After letting your campaigns run for at least two weeks, return to the KPIs you set earlier and see how each campaign is doing. Focus your spending on the campaigns that are meeting your goals most efficiently. If you find some areas where you’re spending a lot but not seeing great results, those are the spots to cut back on or focus on improving.
Remember that shifting your budget around is the best way to hit your targets. Keep evaluating and adjusting your spending every few weeks to get better results.
If your goal is brand awareness:
- Start by determining your key goals or KPIs (Key Performance Indicators).
- Look at metrics that show how many people you’re reaching and how engaged they are. Think about things like how many different people see your ads (unique reach), how often they interact (engaged sessions), how many click on your ads (click-through rate), how much you’re paying to show your ad 1,000 times (cost per thousand impressions, or CPM), and how often the same person sees your ad (frequency).
- Set your budget by defining what you want to achieve with your KPIs.
- Decide on the number of clicks or views you’re aiming for. Use tools like Google’s Reach Planner to get an idea of the average costs for showing your ads (CPM) and getting clicks (CPC) in your field for your target audience and the type of campaigns you’re considering running.
- Nail down exactly who your audience is.
- Focus on a specific group within a certain area, especially since broad targets can be tough to measure and impact effectively. For instance, a bike shop looking to boost its presence should mainly aim at cycling fans nearby.
- Considering a wider reach makes sense if you sell online, but always match your budget with the expected reach. Otherwise, you might only have a few people see your ad or annoy potential customers with too many ads.
- Determine how to divide your budget between campaigns.
- A smart approach is to concentrate most of your budget on your primary audience and then allocate smaller portions to one or two additional groups to test the waters in new areas. Here’s how a bike shop in Minneapolis might split its budget:
- Cycling enthusiasts in Minneapolis, MN (population 425,336): 70%
- Cycling enthusiasts in Des Moines, IA (population 212,031): 20%
- Cycling enthusiasts in Bismarck, ND (population 74,138): 10%
- Remember that the campaign’s length, desired ad frequency, and audience size also play a big part in this planning stage.
- A smart approach is to concentrate most of your budget on your primary audience and then allocate smaller portions to one or two additional groups to test the waters in new areas. Here’s how a bike shop in Minneapolis might split its budget:
Choosing how to reach your audience depends on what kind of ads you can create. If you have great video content, consider Video/YouTube campaigns. If you have strong images, go for Display campaigns. If you have both, mix it up with DemandGen campaigns.
Launch your campaigns with the budgets you’ve decided, but be ready to tweak things. If your costs are higher than expected, or certain campaigns or audiences aren’t performing as hoped, don’t hesitate to adjust your bids or shuffle your budget. Monitor performance and make changes every week or two to stay on track toward hitting your targets.
If your goal is to have a full-funnel strategy:
If you plan to run a full-funnel campaign strategy focusing on driving awareness, consideration, and action, keep reading to learn how to allocate your budget across various Google Ads tactics. Before we dive deeper, it’s important to note that spreading your budget across several tactics requires a substantial investment. We recommend a minimum budget of $30,000 per month for effective distribution.
- Start by determining your key goals or KPIs (Key Performance Indicators).
- For strategies aimed at the bottom of the funnel, like search, shopping, and Performance Max campaigns, focus on KPIs such as leads, cost per lead, purchases, revenue, and return on ad spend (ROAS), depending on whether you’re aiming for lead generation or online sales.
- For top-of-the-funnel tactics, like display, video, and DemandGen campaigns, consider metrics like unique reach, engaged sessions, click-through rate, or cost per thousand impressions (CPM).
- Middle-of-the-funnel strategies should blend these KPIs.
- Set your budget by defining what you want to achieve with your KPIs.
- Refer to the goal-setting advice discussed in previous sections.
- Determine how to divide your budget between campaigns.
- Bottom Funnel: In Google Ads, allocate a significant portion of your budget to bottom-funnel strategies (brand and non-brand search campaigns, along with Shopping or Performance Max campaigns) since they tend to yield the best cost per action (CPA) or highest ROAS. We suggest starting with directing about 70% of your total budget here. Define your CPA or ROAS targets and keep funding these areas until you achieve your objectives before moving to higher funnel strategies.
- Middle Funnel: Include video, display, or Performance Max campaigns targeting audiences already familiar with your brand, like site visitors or email lists. Performance Max can serve mid and bottom-funnel goals by displaying ads in various formats while still driving significant action. We usually allocate about 20% of our total budget to mid-funnel tactics to re-engage people who already know your brand.
- Top Funnel: Focus on reaching new audiences with video, display, or DemandGen campaigns. This could involve targeting specific segments like Google’s pre-built audience interested in “Women’s Athletic Shoes” or those with an affinity for “Frequently Ordering Takeout.”
Budget allocation across funnel stages depends on several factors, but a solid approach is to prioritize bottom-funnel tactics, followed by mid-funnel, and then top-funnel with any remaining budget. Here are some general guidelines for when to stop increasing your budget at each funnel stage:
- Bottom Funnel: Spend until you achieve the desired CPA/ROAS.
- Mid-Funnel: Spend enough to maintain a good CPA/ROAS without overwhelming your audience (avoiding a frequency of 10+).
- High Funnel: Use any leftover budget here.
As an example, for an eCommerce client with a $55,000 monthly budget, our allocation might look like this:
- Search: $17,000
- Performance Max: $19,000
- Video: $8,000
- Display: $6,000
This model focuses on investing heavily in strategies that drive direct results, gradually expanding to strategies that nurture, and finally introducing new audiences to your brand. Always shift the budget between campaign types and funnel stages to ensure you reach your goals.
How to identify underperforming campaigns & adjust strategies accordingly
In managing Google Ads, keep an eye on key metrics like conversion rates, cost per conversion, the value you get from each conversion, click-through rates (CTR), and most importantly, the return on ad spend (ROAS). These metrics help you determine which campaigns are doing well and which aren’t. If a campaign isn’t doing as well as others, it’s smart to move some of your budget to the ones that are showing better results. This strategy helps ensure you’re spending your money where it’s most effective, leading to more successful ad campaigns.
A straightforward method to spot the underperformers is by comparing these metrics across your different ad strategies. For example, if one strategy gets you better results with less money, try shifting some budget to it gradually to see if you can get even more out of it. Campaign A costs you $100 for each lead (CPL), while campaign B only costs $50. Moving some of your budget from A to B could mean you get more leads for the same amount of money, lowering your overall costs per lead.
We regularly check how budgets are spread across campaigns at Augurian to ensure our clients’ money is being used effectively to boost performance.
The role of bid strategies in maximizing campaign performance
Budgets and bid strategies are the two primary levers for enhancing your Google Ad campaign’s performance, akin to the essential elements of sailing across a vast ocean in a sailboat. Here, the budget represents the size of your sail, granting your campaign the reach and exposure akin to how a larger sail captures more wind to propel the boat forward. However, the sail’s size alone doesn’t ensure a successful voyage. The direction in which you set this sail, paralleling your bid strategy, is crucial for utilizing your budget effectively to navigate toward your advertising objectives.
Employing a “maximize” bid strategy is like setting your sail to catch as much wind as possible, aiming for broad exposure without a focused target. This approach can quickly deplete your budget while diverting you from the most efficient path to your goal. Conversely, a “target” strategy adjusts your sails to pursue precise objectives, such as achieving a specific cost per action (CPA) or return on ad spend (ROAS), guiding your campaign with intent even if it means sacrificing some reach for accuracy.
Understanding the balance between these two controls is vital, much like a skilled sailor’s ability to adjust the sails to optimize wind usage while steering toward the desired destination. A marketer must judiciously allocate their budget and tweak their bid strategy to strike a balance that maximizes campaign performance, ensuring effective and efficient progress towards marketing goals.
When adjusting your bid strategy, consider it a communication to the ad system about your priorities. Shifting from a strategy aimed at “maximizing” to one that “targets” specific outcomes instructs the system to prioritize certain metrics before ramping up spending. This strategic adjustment can profoundly influence your campaign’s spending behavior and efficiency. Increasing aggressiveness in your bid strategy typically results in higher expenditure as it allows more freedom in bidding. However, moving towards a more targeted approach may initially reduce spending, especially with ambitious targets, due to the added constraints on how your ads compete in auctions.
In essence, the art of managing Google Ads mirrors the nuances of sailing, where both the size of your sail (budget) and how you choose to set it (bid strategy) determine the success of your journey across the digital marketing sea.
What does successful budget allocation look like
Allocating your budget effectively is more of an art than an exact science, mainly because it hinges on your specific business goals and needs. Think of it not as a “set it and forget it” task but rather something to revisit and adjust regularly.
For a successful budget allocation, it’s crucial to identify and invest well in your main strategies. These should deliver solid, profitable results and make a real difference to your bottom line. Ideally, these strategies should support key performance indicators (KPIs) across all sales funnel stages, from sparking initial interest and building brand awareness to capturing that interest and prompting action.
At Augurian, a smart budget plan also always sets aside funds to try out new ideas and strategies. This “edge testing” mentality ensures you stay ahead in the digital marketing game, adapting to new tactics and platform updates without missing a beat.
What should you do next?
This depends on your role as a marketing director or leader in your company and how you feel about your Google Ads performance.
By implementing the tactics outlined in this guide and staying vigilant in monitoring performance metrics, you can unlock the full potential of your advertising budget and propel your business to new heights.
If you’re managing a team that is responsible for this, you can use this new information to hold them accountable. If it’s all on you on top of juggling other aspects of your marketing like SEO, Email, website management, etc, then look at getting help.
We created our free diagnostic paid media audit for people in your shoes. Our digital advertising experts dive into your current Google Ads account, review your budget allocation strategy against our best practices, and share personalized recommendations to maximize your Google Ads budget.
We will even meet with you to explain our recommendations. And did we mention it’s completely free? Request an audit and take the first step towards reaching your business goals.
- Marketing Director’s Guide to Maximizing Your Google Ads Budget - April 10, 2024
- From eCommerce to B2B: Unpacking Google Ads Pros & Cons by Industry - April 1, 2024
- A Quick Guide to Google Ads Conversion Tracking - April 6, 2022
