This week we are featuring guest articles from our PPC Hero allies! We requested submissions from our readers and we received excellent responses from some great PPC bloggers! The PPC Hero team will return to our regularly scheduled articles next week. Enjoy!

The hardest part of every advertising campaign is determining how much to spend. There are numerous variables to work with like what the reach will be (# impressions) and what the company will get in return (ROI). Determining those will be more difficult if you have not worked with paid search before. It’s like asking a new marketing intern what the budget should be for the entire department on their first day to work. Many PPC experts don’t always have the best answers because the real truth is that it’s relative to what your goals are and your comfort level.

So what should your starting budget be? Here are a few tips to help you determine that and also when you should start thinking about increasing that budget. We will be covering Google Traffic Optimizer, the calculations necessary, spend level tips, and finally the points at which you should consider adding to the budget.

Google Traffic Estimator
In paid search there are a few steps to assist in budgeting. First, you need to build your list of keywords. Here are some resources for that. Once you know what you are bidding on to start with, price out those keywords. The Google Traffic Estimator is the best free tool out there (but you have to have an AdWords account to access it). Enter your terms, location and see what Google recommends for max spend.

Then determine your max to spend a month. Think about how many leads it takes you to close a sale, phone call or walk-in. Think of those as clicks, how many clicks a day would you need to close a sale? Let’s say you have a 10% close rate. So you would need at least 100 clicks a day to get 10 sales.

Now what days of the week do you realistically think you will get the most clicks? Are you closed on the weekends? If so, count how many business days there are in one month. Let’s say there are 23 business days this month. Take your average cost for each click, let’s say $1.00, and multiply that by how many clicks you need a day, 100 x $1.00 = $100. Now take that amount and multiply that by 23, $2300. That would be your monthly budget.

Don’t Spend Too Little
Compare that to your first number and work from there. The only real risk is setting your budget too low. Few companies will see a return on such a low spend and can produce a false negative ROI on the campaign. Be sure to give your campaign a fighting chance, you don’t want to spend your entire budget in the first few hours of the day. Don’t shortchange what could be a triple digit ROI campaign.

Adding to the Budget
Once you know where to start, let it run for a few weeks at least. Then start messing with bids, calculating ROI, and changing budgets. Play with geo-location, keyword match types, and day parting (if you are B2B do you really need to be bidding at 2am?) where relevant to make your budget last and increase conversions. You will want to increase your budget if you:

  • Notice your ads turning off towards the end of the day
  • See a message from Google indicating that you are not getting all the traffic you could be getting
  • Run numbers that say you are doing great and could even stand to spend more
  • Just remember to be very careful, detailed, and take baby steps. One mistake can cost you lots, but the rewards from a well-run campaign are endless.

Guest Blogger Bio: Kate Morris is the Director of Client Strategies at New Edge Media. She specializes in paid and natural search, and recently getting her footing in social media marketing. You can find her on twitter @katemorris.