What’s a sensible AdWords campaign going to cost?

One of the most frequent questions asked by clients considering using AdWords is what is a sensible campaign going to cost? You’ll not be surprised there is no definitive answer to this question – “how long is a piece of string” is often the phrase that comes to mind.

What about ballpark figures though? Generally, if you’re a small business you can expect to spend hundreds per month at a minimum. For a medium-sized business, expect to pay thousands at a minimum and even more for a large business.

They are very general numbers, however, as they don’t take into account your industry, what you sell, your competition, and many other things.

Let’s try, therefore, to work out a sensible AdWords budget for your business. There are lots of ways you can do this, but the following is an approach that will apply to a wide range of businesses.

Before you can work out a sensible budget, however, you need data. So, we’ve broken the following into two steps – before you have data and after. If you have sufficient data from previous AdWords campaigns, you can skip the next section. If you don’t, read on.

You Don’t Have Data

You need data from previous AdWords campaigns to calculate what advertising on the platform should cost you in the future. If you don’t have this data, you will need to get it as you need to start somewhere.

Specifically, you need about 150 clicks per month for a minimum period of three months. In addition, you must spend time optimising and improving your ads during those three months to get the best results you can. This will give you the data you need to work out your AdWords budget.

The cost of this will depend on the average CPC (Cost Per Click) of the keywords in your campaign. If the average CPC is $2, for example, this starting point will cost you about $300 per month.

You Do Have Data

Once you have data, you can work out a sensible budget for your future AdWords campaigns. You need three things:

  • Average CPC of your keywords
  • Average number of clicks per month
  • Conversion rate
  • Maximum conversions you can either achieve or handle per month

On the last point above, you will first need to look at Google’s predicted search volumes. You might want to get as many of those people as possible. Alternatively, your business might only be able to cope with a set number of sales per month, particularly if yours is a service business or the products you sell have limited availability.

So, let’s put some numbers on this by way of illustration.

  • Average CPC of your keywords – $3
  • Average number of clicks – 150
  • Conversion rate – 20%
  • Maximum conversions you can either achieve or handle – 120

So, the total cost of the above AdWords campaign is $3 x 150 clicks = $450.

This generates 30 sales (20% of 150).

Before you go further, you must make sure the campaign is profitable, i.e. are you making enough money on those 30 sales to cover the $450 cost of advertising on AdWords.

If you are, you can move to the next stage which is looking at maximum conversions – in this example, you want 120. This means you need four times the number of clicks which equates to four times the monthly AdWords cost, i.e. a sensible AdWords campaign in this scenario is going to cost $1,800 per month.

So, it’s time to get your calculator out – or get someone who can work these sums out for you.