Is Your Low Daily PPC Budget Leaving Conversions on the Table?

If you’re a Google AdWords advertiser you probably have a monthly as well as a daily budget for each of your campaigns. You may have arrived at your monthly figure based on what your company can afford, but how did you arrive at your daily budget? If your ads stop showing some time before the end of the day, your budget is likely set too low and contrary to what you may believe, low daily budgets can really hurt your PPC campaign’s conversion rates.

Do you think about your daily PPC budget in terms of how much you can afford to lose on advertising on a daily basis? If so, your PPC campaign is probably not paying for itself and at the end of the month your Return on Ad Spend (RoAS) is most likely negative. As such you are most likely setting your daily budget as low as possible, in order to minimize your losses. Unfortunately this strategy leads to a vicious circle which will eventually end when you give up completely and shut down your PPC campaign. What you actually need to do is the exact opposite and increase your daily budget, here’s why.

First, let’s do a little math to demonstrate the effect a low daily budget has on a PPC campaign. For this example, let’s assume we’re looking at a fairly new eCommerce site with a 3% conversion rate. Let’s take a look at the metrics:

  • Conversion rate = 3%
  • Cost per Click = $1.75
  • Number of visitors necessary for 1 conversion = 33
  • Daily Budget = $25.00
  • Quality Score = 4

In the above scenario, the $25 daily budget is enough to pay for 14 clicks. Unfortunately, at a 3% conversion rate, you need at least 33 visitors to generate a conversion. Although it’s possible that you’ll get a conversion within 14 visits, the odds are highly against you. It may happen two or three times per month, but probably no more than that. You need to give yourself a chance to convert at least once per day, and that requires increasing your daily budget.

To get the minimum 33 visitors, the daily budget would have to be increased to $58. But let’s say that you raise your budget to $58, start getting one and occasionally even two conversions per day, but your budget is running out by 3pm. Clearly, you are still losing conversions which could be captured if your budget lasted until the end of the day. What to do? Increase your budget again, until it lasts through the end of the day. Now you may be getting 4 or even 5 conversions and your PPC campaign may be turning into a profit center.

There are other advantages to increasing your daily budget:

  • You are collecting more data from visitors which you can in turn analyze (data mining) and develop new and profitable keywords.
  • Data mining will also yield negative keywords, which can help you reduce non relevant search queries which would never convert.
  • By implementing negative keywords your Click-Through-Rates will go up and so will your quality scores. Result? Your cost per click will go down, saving you money. Conversion rates will also improve.

In the event that you cannot afford to increase your daily budget, then your best option is to lower your keyword bids. Yes, your ads will show up further down the Search Engine Results Page, but is still a better option than only having fourteen visitors per day. Remember, for a PPC campaign to work, you have to provide it enough traffic to get at least one conversion. It may seem like a long and arduous process, but dedicated PPC program management will eventually yield the results you’re looking for.

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