Advertising budget planning: Choose your best strategy

No doubt that you want to understand the budget for your advertising campaign before it’s actually launched. However, without accurate predictions, it’s not easy to figure out how much cost the whole campaign is going to cover.

At RecommendMe, we use a couple of effective strategies for your advertising budget planning. Some of them suggest average rates without taking much of your time and resources. Others are more specific, although they demand a lot of your business data as well as experience in data analysis. Let’s cut to the chase and take a closer look at some solid strategies we’ve prepared for you.

1. Focus on CPC

Budget allocation based on cost-per-click (CPC) is one of the most common approaches to  your advertising expense assessment. To get it working, you can utilize Keyword Planner. It’s a free Google tool that gives information about the number of impressions, clicks, and the cost of each click triggered by certain keywords. Let’s check out how it works.

Find Keyword Planner in the Tools section of your Google Ads account. Go for Keyword Planner and select “Get search volume and forecasts”. Now enter the list of keywords or add a CSV file from your device. The AI will provide you with the forecast for the following week, month, and quarter.

Click on the Historical metrics tab to find out the average monthly searches for certain keywords and their possible variants over twelve months. This information will enable you to figure out the estimated amount of traffic and the cost of it.

All in all, this budget planning strategy is free and simple to utilize. Yet, it has its downsides. To begin with, you’ll have to make a keyword list. Secondly, the forecast implies a 24/7 advertising and your business might not need that. To top it off, this strategy is not always reliable. The thing is that Google doesn’t reflect some important factors that affect CPC in the forecasts. These factors may include the quality of your account, holiday periods, your keyword bids, etc.

2. Consider CAC and LTV

Once you focus on return on investment, you should take note of the customer acquisition cost (CAC). CAC is the cost you spend to acquire a new customer. Don’t confuse it with the cost per lead (CPL), which is based on the number of leads, like sign-ups. Although leads are valuable for your business, they can’t ensure conversions.

A word of advice: to improve your experience of using CAC, you can pair it up with customer LTV (lifetime value). Lifetime value is the revenue you are going to get from a certain customer over time. Having this in mind, you’ll better understand if your current CAC will pay back. You can easily calculate LTV using one of the multiple online calculators.

In essence, this strategy is a top option if you want to get the most accurate estimation of ROI. Plus, you can set the limit for your CAC and plan your budget focusing on this amount. On the flip side, you’ll achieve the expected CAC only in case you’ve set up a quality marketing process. Also, unstable inflation can badly affect the forecast accuracy.

3. Keep an eye on your competitors

It’s also a good idea to know your competitors before starting an advertising campaign. It will help you select the best strategy to create a successful environment for your business.

The first thing you have to focus on is the budget of your major competitors. There’s a bunch of online tools that will provide you with these data. So how does it work?

It’s easier than you think. Just enter your competitor’s domain into a search box of your chosen tool and you’ll get the list of keywords, the number of queries matching them, and the approximate number of ads shown. Now, use the Keyword Planner to calculate the average CPC for each keyword. Then, sum up these figures to find out the approximate amount of money that your competitor spends on search advertising.

Once you’ve decided to take advantage of this strategy, you’ll have a clue about how much your competitors invest in ads. This will help you figure out if it makes any sense to compete with them. In addition, you don’t need to create a list of keywords and think of the negative words.

On the downside, keep in mind that quality analytical tools demand a paid subscription membership. Also, the Keyword Planner may not always be completely accurate with the calculations.

4. Analyse your sales

Good news: Google offers an excellent tool to improve your experience of ad spends planning. It’s the Performance Planner that will let you develop a plan to predict the campaign’s efficiency. Plus, with the Performance Planner, you will be able to analyse how the changes in the campaign’s adjustments can affect the key performance indicators.

You can draw up your advertising budget relying upon the real conversion actions within Google Ads. For this, you need to create a test account, then properly adjust and launch a low-budget advertising campaign. The Performance Planner will give you insights on your future budget and the number of conversions you’re going to get within it. However, your campaign should meet the following requirements:

  • Be active for no less than 72 hours;
  • Have received at least three clicks over the last week;
  • Have recorded at least one conversion within the last week (if the campaign is focused on conversions)
  • Your strategies include the following: Manual CPC bidding, Enhanced CPC bids, or Target CPA bidding.

To wrap it up

So let’s recap the main things you should keep in mind while planning your ad budget. First, if you lack the advertising statistics, use the AI tools to understand the cost of a certain traffic volume. Also, you can take into account your competitor’s budget. Finally, with the advertising budget data, you will be able to predict the cost of each customer.

And get this: for any business, it’s absolutely essential that you forecast the return on your advertising investment. It will help you figure out the optimal budget that will skyrocket your sales. We hope you’ll find our strategies useful for your budget planning.