Choosing Keywords for PPC Campaign and
Setting a Budget
Choosing PPC Keywords
When choosing keywords for either SEO or PPC campaigns, people
often tend to pick keywords that are too broad and not specific
enough for their products/services. This can be an expensive and
ineffective approach, especially in PPC campaigns.
For example, a company that sells windshield wiper motors decides to
run a PPC campaign using the following keyword:
While the above keyword does describe their products – it also
applies to a wide range of other non-related products. A more
specific and relevant keyword would be:
Overly general keywords tend to be more costly per click. In the
above example, at the time of this article, a #1 PPC click in Yahoo!
for ‘auto parts’ will cost $0.75 while a #1 PPC click for
‘windshield wiper motors’ is $0.28
With more specific keywords the cost per click tends to be lower,
however the search volumes tend to be lower as well. This can be
compensated for by increasing the number of specific keywords within
a PPC campaign. In this way, the number of times a company’s PPC ads
are displayed remains high - but the costs per click are kept lower.
How SEO and PPC Keywords Interrelate
The right keywords for an SEO (organic) campaign and a PPC
campaign may be different, but they can overlap – especially at the
beginning of the SEO campaign.
A new website on the internet is not going to immediately have SEO
rankings for the top and most competitive keywords in its field. It
will take time to achieve this, in some of the most competitive
industries it can take a very long time. Once a company has earned
good ranking for their more focused keywords, they will be able to
target broader, more competitive SEO keywords. So essentially, new
websites on the internet will often choose the more focused keywords
that are normally found in PPC campaigns.
Determining a Maximum Cost Per Click
Setting the maximum cost per click in a PPC campaign involves
working with a number of factors – as determined by the website’s
performance. To illustrate how to make these calculations we are
using a simplified example:
The example website has Conversion Rate of 4% from search engine
referrals. That is to say – 4% of all website visitors who have come
in on PPC clicks make a purchase. The average of each of these sales
is $100.00, and the profit from each sale is 30%. For this exercise,
we'll say that that the website is willing to put 50% of the profit
back into the cost of PPC clicks.
Conversion Rate = 4% (on average 25 PPC visitors result in one
sale)
Average Gross Sale = $100
Profit per Sale = $30 ($100 x 30%)
Maximum Budget of PPC Spend per Sale = $15 ($30 x 50%)
Maximum Cost per Click = $0.60 ($15 / 25 visitors)
As you can see from the example above, this will give us a
maximum recommend bid of $0.60 per click.
Every click depletes your available marketing budget – making the
need to choose keywords wisely essential. Choosing the top and most
competitive keywords can very quickly run down a PPC budget – while
choosing more relevant, better priced keywords can lead to getting
the most out of a marketing budget and increase sales. However,
there is another factor to consider – the profitability of
individual keywords.
Keyword Profitability
To take it a step further in making the most out of the PPC
budget, we need to evaluate the effectiveness of individual keywords
from a profit perspective.
In our following example, the website is in the gift basket industry
and has a monthly PPC budget of $500. To get as much profit as
possible out of the budget, we will review the keyword performances.
There are many ways to track PPC related activity on a website – one
of the most effective (and free) ways is to use Google Analytics.
Note the following keywords and their average costs per click:
wine gift basket - Average cost per click $2.50
gift basket - Average cost per click $2.00
If both of these keywords have the same Conversion Rate to sales
then the selection is clear – if possible spend the entire $500
budget on ‘gift basket’ as you will get the most number of clicks.
However, if the Conversion Rates are not the same - then each
keyword will need to be evaluated separately. In our case ‘wine gift
basket’ has a Conversion Rate of 4% and ‘gift basket’ has a
Conversion Rate of 3%.
In our example we will keep it simple by saying that every sale on
this website generates $200 in gross profit. If a review of website
analytics shows the following:
If the entire $500/month PPC budget were spent on ‘wine gift
basket’:
- wine gift basket 200 clicks x 4% Conversion Rate = 8 sales
with $1600 gross profit
If the entire $500/month PPC budget were spent on ‘gift basket’:
- gift basket 250 clicks x 3% Conversion Rate = 7.5 sales with
$1500 gross profit
In this case, we would tend to recommend ‘wine gift basket’ as it
will generate more profit for the website.
Setting PPC Budgets
There are no simple answers on to how to set an initial PPC
budget. In general, it should be part of the overall marketing
budget – and it should be measured and evaluated on an ongoing
basis. It may be possible to set up an initial PPC budget using
information based on an industry’s overall PPC performance – if it
is available from industry organizations.
Fortunately, with performance measurement tools such as Google
Analytics, it is possible to get a good understanding of how
effective PPC spending is for a website’s direct sales – and to base
future PPC budgets on on-going review and analysis.
So, is this it? Nope, sorry to say it doesn't end here. The next
thing is writing effective ads, we need to make sure that the ads
will draw people in and want to find out about your products and
services. Getting the rankings is just part of the step, we need to
make sure the site/page is working to its best and properly getting
people to take the next step on your website.
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