When it comes to an ad spend, you may think the higher your budget, the more conversions that will create. But, that is not always the case, especially when it comes to your AdWords budget. If you aren’t seeing the results you had hoped for, before you jump right to increase your budget, it’s important to first look at what might be limiting you.
1. The “max bid” you set for each ad group or individual keywords, regardless of what your bidding strategy would be, limits your spend and as a result, your performance (there are different metrics to measure performance with, such as the number of clicks you receive from your ads, your CTR, your conversion rate, ROI, etc.) Here the main question of “do we need to increase our monthly budget or not” will become “do we need to increase the Max CPC for our ad groups or different individual keywords or not.” The answer to this question will be yes if it will help you get better performance, and no if it doesn’t help with getting better performance. So that will depend on what metric you will choose to gauge your performance, with clicks at the top level of the funnel and the easiest metric to deal with, but the least accurate one; and ROI at the bottom of the funnel, more accurate but hard to deal with. This is because ROI as a measure is not as granular as clicks are. That means, for example, calculating ROI for each individual keyword is not viable unless we have lots of historical and field data.
Bonus Tip: Is your max bid for top performing keywords limiting your performance? A maximum CPC is set for each ad group, and that can limit your spend, as well as your performance. You’ll need to look at each of your ad groups, and then each of your individual keywords within those ad groups, to see if your set maximum bid is limiting you or not.
2. Your “daily budget” also limits how much you spend on average per day throughout a month and that can limit your performance by not letting your ad show up as often as possible or ideally all the time. The main question we had at the very beginning here becomes like this: if we increase our daily limit does it contribute to higher performance?
But how can you tell if increasing your max bid or daily budget will improve your performance? An increase in clicks isn’t enough to tell us if increasing our max CPC or daily budget will help you, but rather, looking at your ROI will. Calculating ROI for each individual keyword requires a lot of historical data and real field customer acquisition data before you can come into any meaningful statistical conclusion.
But as scientists always do, they simplify things. There is one way we can simplify our main question and that’s by asking ourselves: What goes into increasing the performance regardless of what measure we use to determine this performance? The answer is simple:
There are two independent predictors that have an effect on performance:
- Getting higher Avg. Position – The higher you are, the more visible you are to potential customers. The ideal goal is to get an average position of one – your bid limit can have an effect on this.
- Getting your ads to show up more frequently – The more your ad is shown, the higher the likelihood of potential customers to see it, act on it and hopefully convert on your site or directly via your ad (calling/texting you directly from your ads.) The ideal goal for this is to appear at all times when your relevant keywords are searched – your daily budget limit has an effect on this.
You can then take one of these two approaches to determine if an increase in the bid or daily budget will result in a better performance.
- Increase your bid and then wait to see if your ad performs better. Again, in scientific words, performance is only a construct, now you need to choose a variable by which you will actually measure it.
- Bid higher only when it will improve what constitutes a better performance, i.e. gaining a higher average position or giving you more ad visibility (higher impressions). This is typically a better approach to take.
Assuming everything else is equal (the quality and relevance of your ads and your landing pages are equal to that of your competitors), bidding higher for your top performing keywords should result in a gain in higher average position. This is when you need to turn to your analytics to determine which of your keywords are actually the higher achievers. When you get into your data, you’ll typically see that some keywords just are better at converting, so focus on those keywords.
Bonus Tip: Do you have high-performing keywords that are below the bid for the top of the page placement? If so, increase your bid to the minimum top of the page bid. Doing so can improve your average position. This, in turn, can create more clicks (the higher you are positioned, the more likely internet searchers are to click on your ad) and the more clicks can increase the CTR for these keywords, which improves your quality score for them. This will increase your average CPC for those keywords, and then their ad groups, and your spend in general, but the outcome should still be favorable due to the improved performance.
Now let’s look at how a daily budget can impact your performance. When you have a daily budget, Google spreads out when your ad appears. To determine if you need to increase your daily budget you should first look at your current budget. Have you been coming close to your monthly budget limit (average daily budget multiply by the number of days in the month.) If you are not getting close to your monthly budget, you probably don’t need an increase. Likewise, evaluate your individual days over the past several months. You may notice that your ad spend varies by day, and on days when your ads have received more traffic, you may have noticed your daily spend was as much as twice your set average daily budget. Google makes this adjustment by balancing this increase out with days that your ad falls below its daily budget (this is related to Google Ads’ overdelivery policy). If you have not had any days when your budget has increased this much, then you can determine your daily budget is not limiting you.
In these instances, just making an increase to your overall daily budget won’t have an effect on your performance. However, looking to your keywords and seeing which are performing higher, and increasing the maximum bid allotted for those, may result in a need for increasing your daily budget consequently.
Another way to determine if an increase in your Google Ads budget can help your performance is to look at your Impression Share info.
Impression share is an important metric because it tells you the percentage of impressions your ad received, compared with the total number of impressions your ad could receive. You can find impression share data for ad groups, campaigns, and individual keywords. This can offer good insight into whether increasing your budget could help you reach more people.
Bonus Tip: Impression share includes all auctions in which your ad showed, as well as the auctions where your ad is competitive enough to show. You may see small fluctuations over time, but these small fluctuations are normal and shouldn’t cause to take action.
There is another question that you can ask which is not irrelevant to the question of “if we must increase our ad campaign budget” and that is “if you are spending your budget correctly”. Actually, what you have to do before even you ask yourself if you need to increase your budget is to see if you are spending your current budget efficiently and effectively.
Are You Spending Your Ad Budget Correctly?
Just looking into the number of clicks you get isn’t enough to tell you if your AdWords budget is being well spent. Clicks send people to your website, but that doesn’t mean they are actually converting to customers. A lot of traffic doesn’t necessarily mean your ads are working the way you had hoped they would.
Negative Keywords – One way to help improve the quality of your traffic is to include negative keywords. For instance, if you are an orthodontist, you want patients looking for orthodontic braces, rather than orthopedic braces. So, negative keywords could include knee, ankle, wrist, etc. so that patients looking for those types of braces don’t see your ad. If you are a dentist and are advertising for dental implants you need to make sure you are not getting clicks for cheek implants, butt implants or breast implants. If you are a dentist that doesn’t take Medicaid, for example, it’s important to add Medicaid as a negative keyword. By doing this, you can conserve your ad budget and prevent your ad from appearing in searches that aren’t actually relevant to your business.
Bonus Tip: Make sure you are targeting the right set of keywords and that those keywords are actually the ones that you really want to target. Also, you need to make sure your negative keywords are not limiting your ads from showing up to potential customers.
Location Targeting – Another way to make sure your ad budget is being spent correctly is to look at where your clicks are coming from. If you are an orthodontist, you don’t want to receive any clicks from outside of your 10-miles office radius, for example. When setting up your target locations, you can set the option to only include those that actually are within your target location because the default option will include everyone that is interested in your target location, too, which can result in getting many clicks from irrelevant locations. This will suck up your budget.
Quality Score – Improving your quality score for different keywords is another way to optimize your performance without increasing your daily budget or max bid. Quality score is designed to give you a general idea about the quality and relevance of your ads and landing pages. It gives a 1-10 scoring report for each keyword as an estimate of the quality of your ads, as well as the landing pages in relation to the keywords you are targeting for them. To make it simpler to understand your quality score for each keyword is the “Keyword-Ad Text-Landing Page” relevancy score. To improve your quality score, you don’t need to increase your budget, but rather update your ads and landing pages for related keywords so Google finds them more relevant and useful enough to give a higher score.
Bonus Tip: Sometimes your ad campaign structure might need an update, for example in case you are targeting too many diverse keywords with just one ad group if you simply divide them into different ad groups with closely relevant keywords it would increase your ads-keywords relevancy and therefore increase your quality score for each target keyword.
The question of whether or not you should increase your AdWords budget isn’t always a straightforward one. It takes careful consideration of what your goals are, to come up with a strategy to reach those goals. SEO Foxy is a Google Ads Partner and expert in online marketing and helping clients navigate the sometimes confusing waters of managing their Google Ads account. Call us today at 844-SEO-FOXY or check out our Google Ads management services.