Adwords Keyword Budget Estimator

If you've struggled with Google's AdWords program, you have my sympathy. There's an enormous amount of information to absorb before you even begin. But there comes a time when you have to deal with the bottom line: figuring out how much you can actually afford to budget for your Pay Per Click (PPC) advertising. This simple tool gives you a summary of your advertising costs based on the selling price of your product or service, the estimated sales conversion rate, and the estimated Cost Per Click (CPC). The goal is to calculate where your break-even point is, and where your advertising starts to turn a profit. It is a work in progress, and I would appreciate your comments and suggestions for making it better and more useful.

If you're new to online advertising, there are some things you need to know. The first thing to do is to make sure that your selling price is competitive and that you know the keywords that you want to target with your PPC advertising campaign. The Google Traffic Estimator Tool can help you to select keywords that will attract a reasonable share of your target audience and the estimated cost per click for each keyword phrase. The AdWords bidding system makes it likely that the costs shown by their Estimator tool will only give you a rough estimate of the price you'll have to pay for each click. You may be willing to pay more per click to give your ad a more prominent position, or you may be willing to live with a less optimal ad position in order to stretch out your spending over time. These are decisions that you can only make as you gain experience.

A major aspect of online advertising that gets little discussion is the average Click-Through Rate (CTR) that you can expect to achieve. I'm afraid I won't be of much help here. My limited experience is that ads tend to get a CTR in the single digit percentage range. Checking your competition can be of enormous help here. Take an objective look at your competitior's ads before you start your own campaign. You probably know the most successful among them, so take a look at how they present their offerings to potential customers. Are they dry and straight to the point, or do they present a more informal message? Do their ads emphasize price, service, or features of the product?

Among the harsh realities of online advertising is that the Conversion Rate, that is the percentage of clicks that result in actual sales, is also generally in the low single percentage. As the popular saying goes, "Your milage may vary." If your prices are competitive and your website is effective, you can beat the odds in this critical statistic. But while you're just starting out, keep your expectations low.

The form below requires some basic information, starting with the price you've set for the product or service that you intend to advertise. That's followed by the percentage of your gross revenue that you've budgeted for advertising. The "Sales Quantity Target" is your desired number of sales that you want to achieve during your campaign. This allows the calculator to present some overall figures in addition to the per-click and per-sale results. Next is the Expected Sales Conversion, or the percentage of clicks you expect will turn into sales. Finally, there's the Estimated Cost Per Click. Start with the figures that Google's Keyword Estimator tool presents. By running the calculator several times with different settings, you can see how each value affects the final results.

Selling Price: ? $
Selling Price Ad Budget %: ? %
Sales Quantity Target: ?
Estimated Click/Conversion %: ? %
Estimated Keyword Cost Per Click: ? $

Enter the expected selling price of the product or service you want to advertise.

Enter the percentage of the expected selling price of the product or service you want to budget for PPC advertising.

Enter the number of sales that you want to achieve during your PPC advertising campaign.

Enter the expected percentage of users who click on your ads will purchase the product or service you are advertising.

Enter the expected cost of each click for the keyword(s) you are targeting with your PPC advertising campaign.

The conclusion presented by these figures is the reality that PPC advertising is a balancing act. You can budget a higher percent of your revenue to advertising and live with a lower conversion rate, but if you increase your conversion rate you can be successful with a smaller allocation to advertising. And you can sometimes increase your conversion rate by increasing your CPC in order to attract a more focused audience. Since every market is different, there is no single best solution. Only time and experience will show you the best combination for your AdWords campaign.

Copyright © 2005-2018 by Richard L. Trethewey - Rainbo Design Minneapolis. It's not that I think this is such an earth-shatteringly great presentation, but if you want to copy it, I'd appreciate it if you would ask for permission. I've been working with computers for over 30 years now, and one phrase keeps popping into my head - "I hate it when it's right!" And laptops and smartphones are no better.

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