Calculating your PPC budget isn’t as daunting as it may seem. There are a few basic data elements that you need to have along with a clear vision of the campaign. The first step is to develop a comprehensive keyword list. Accurately estimating your audience reach and campaign costs depends on knowing what terms you will bid on in the PPC auction.
There are several free tools to help generate keywords. I recommend Google Keyword Planner but you will need to sign up for an Adwords account if you don’t already have one. Here is a tip for getting the most out of the data. Be sure to set the Max CPC on the high side, around $100.00 to ensure that you will see the maximum results. You would probably never bid $100.00 CPC for a keyword, but this will allow the Planner tool to show you best results. Also, set the daily budget high as well, around $1000.00 just so you get the most data to work with. If you aren’t familiar with how this tool works there are support articles to assist you.
Another great tool for generating latent semantic keywords is LSI Graph. This tool is a real gem for semantic keywords related to your topic. You can generate a list, pick a term that makes sense for your target and run that keyword to get another set of LSI keywords. The possibilities are endless.
Once you have a good set of keywords you are ready to use the Google Keyword Planner to get estimated search volume and forecasts. You will need to have estimates for Avg CPC (cost per click) for your keywords and estimated monthly impressions. Armed with that bit of information you can determine approximate number of clicks, conversions and cost.
Let’s say you are a bakery that sells cupcakes and birthday cakes. You have uploaded your keyword list to the planning tool. You see that there are an estimated 4500 monthly searches. So, of those 4500 monthly searches, how many will click on ANY ad? Multiple studies are available to help us better understand searchers click behavior. The bottom line is it depend on the search topic. For a specific product like a dishwasher the CTR on ads is much higher, estimated to be over 60%.
We also know that on average of all searches approximately one third or 33% of searchers will click on an ad.
But, how many will click on YOUR ad?
We can assume that the universe of potential PPC clicks for your search term is 1485 (4500 x 33%). If you are just running your ads on Google (Adwords) we know that Google commands 80% of the search market share across all search engines. In that case your click universe is 1188 (1485 x 80%).
The percentage of the 1188 that will click on your depends on the position of the ad (1-3 at the top of the page), how aggressive your bidding, the ad copy and to a large extent the behavior of your competition. In general, use a 5% CTR depending on your industry.
Click Universe x 5% = CTR
4500 x 33% = 1485
1485 x 80% = 1188
1188 x 5% = 59.4
Keep in mind this is a moving formula. The internet is a fast paced, ever changing landscape. Tracking search behavior and understanding user intent is critical to running successful PPC campaigns.