Search presents marketers with the opportunity to target users across all stages of their buying journey, from early-stage research right through to the point at which they are actively seeking to buy – it differs somewhat from the more disruptive channels with audience-based targeting such as Paid Social and Display in that we don’t have to speculate over the intent of the user… We can infer intent from their search query as opposed to relying on algorithms to determine their suitability as a prospective customer.
With this in mind, paid search allows us to confidently target those bottom-of-funnel users that are searching specifically for the product or service that we are looking to promote, and as such it can be used to reliably generate a steady, consistent flow of sales/leads for a set budget.
“… But how much budget do we need to allocate to our paid search
This is a question that we are often asked, and the answer depends entirely on your objectives/goals – ultimately, the vast majority of advertisers are looking to generate sales/leads, so when working out how much budget you’ll need, it can be useful to consider whether you have a certain number of sales/leads that you are looking to generate.
The fundamental aspect of being able to calculate the required budget for your goals/objectives is data. The more historical data that you have available to you (Google Analytics, historical Google Ads campaigns, CRM funnel statistics etc), the more accurately you are able to forecast performance and establish what level of budget is likely to be appropriate.
Essentially what we need to know is the conversion rate for every step of the buying process, and in the case of lead generation campaigns, an average lifetime value of a new client (in the case of eCommerce, this could be an average order value). Depending on your business and the processes involved in generating sales, the required data might be:
- Average CPC (how much you will need to pay for each click)
- Click > Enquiry (website conversion rate)
- Enquiry > Lead (what proportion of enquiries are leads?)
- Lead > Opportunity (what proportion of leads turn into opportunities?)
- Opportunity > Sale (what proportion of opportunities convert to sales?)
- Average lifetime value of a new client
A Worked Example (B2B – Lead Generation)
You are looking to generate £100k of new business, and the average lifetime value of a new customer is £25k – you therefore need to generate 4 sales.
On average, your website converts at a rate of 5% – 1 in 4 of those enquiries end up being leads, of which 1 in 4 are considered “opportunities”, and then 1 in 4 opportunities end up converting.
If we work this backwards, for every sale you need to generate 4 opportunities, 16 leads, 64 enquiries – so in order to generate 4 sales you will need to generate 256 enquiries, and since your website has a 5% conversion rate (1 in 20 clicks ends up resulting in an enquiry), you need to generate 5,120 clicks.
You are anticipating an average CPC of £5 based on historical campaigns and Keyword Planner estimates, so your required budget will be £25,600.
As with any data analysis, the more you have, the more statistically significant it will be and the more confident you can be about your projected results – it is however worth bearing in mind that there are several factors that can affect the performance of your campaigns… You will need to assess the search opportunity – do sufficient users search for your products/services to allow you to generate the required number of clicks in the timeframe you’re looking to run the campaign over? If you have not targeted these keywords at this particular level before then will you need to bid more aggressively to ensure you secure the required number of clicks (this may see your CPCs rising)? Are there seasonal trends that you need to consider (perhaps you are using historical CPCs from a campaign you ran in December but this campaign will run in July)? Are you planning on making changes to the landing page that could affect the website conversion rate?
Nevertheless, the process above will help to give you an indication of the level of budget that you may need to put behind a campaign in order to achieve the desired results. It will also help to ensure that you consider all the variables that may affect the ultimate performance over time, and the levers that can be pulled if results aren’t going the way you had hoped.
If you are looking to generate more leads/sales for your business and would like to speak to one of our experts about how we can help,
give us a call! We also have an in-depth guide on generating B2B leads via digital marketing channels which is free to download.