Through­out the life of your digital media campaigns, there’s a constant balanc­ing act with budget pacing, espe­cially when manag­ing a cross channel program with fluid budgets. Manag­ing to spend a certain amount within a level of effi­ciency can be an arduous task. This blog post will provide a strat­egy to help you in those times when you are under-pacing or over-pacing your budgets.

You have two basic tools you can use to modify your spend­ing pace: Your Cost Per Click (CPCs) and Budgets. Either one of these can poten­tially raise or lower your spend levels. But each impacts your campaigns very differ­ently, and there­fore you need to think care­fully before decid­ing which to adjust, based on the impact of that adjust­ment. Your deci­sion about whether to raise the budget or CPC depends on whether you’re over­spend­ing or under­spend­ing, and on whether or not you’re already meeting your budget limits.

A general rule is that Daily Budgets can be a quick fix for cost cutting; they’ll stop your campaigns from bleed­ing. But regard­ing perfor­mance, Budgets are enablers – they give CPCs room to be more effec­tive. CPCs directly impact the quality of your perfor­mance. In other words,

Consider the follow­ing case: you find that your campaigns aren’t spend­ing enough, but that every day you’re spend­ing as much as your pre-set daily budget allows for. Would you raise your budget, or your bid?

In this case, you need to focus on budgets, not CPCs. Here’s why: By raising your CPCs, you’re poten­tially going to pay more for each click. But since your budget is already maxed, you’re going to get fewer clicks than you were before because the same amount of spend will get fewer clicks now that each click costs more. Instead, raise your budgets; that will allow your campaigns to spend more, enabling you to hit your targets better.

Now think about the proper response when you’re under-pacing and you aren’t hitting your daily budgets. In this case, raising budgets alone won’t help – if your current bids don’t hit a $100 budget, they certainly won’t hit a $200 budget. So raise your bids. Ignore the keywords that are already in first posi­tion; raising their bids won’t help you at all. Instead, look at the keywords that aren’t currently bidding to the first page or top posi­tions and have a rela­tively good conver­sion rate. Those are your prime targets for increas­ing bids, which should increase their traffic and get you more conver­sions. (If even at the higher bids, your budget doesn’t allow you to hit your spend goal, you can raise budget – just remem­ber to raise bids first!)

On the other hand, what if you’re over-pacing: where do you focus? Here, it doesn’t matter if you’re hitting your budgets or not; they both have the same basic strat­egy. In this case, you can certainly drop your budgets to lower spend. But that’s not going to help you opti­mize; it will just ensure you don’t go over your budget. Instead, focus on the bids. Lower­ing your bids will prob­a­bly get you a lower click-through rate (CTR), but the quality of the traffic (i.e. the conver­sion rates) will prob­a­bly remain the same. Lower bids will get you cheaper traffic, which may mean more clicks for the same price as before. Doing this will have accom­plished your goal of lower­ing costs, and may also help you opti­mize toward a cheaper CPA.

In this case, you can also lower budgets to ensure you don’t spend too much, but first lower your bids.

Adding this strat­egy to your PPC toolbox will make you better at manag­ing your campaigns’ budgets effi­ciently. The next step is to focus on opti­miz­ing your CPCs to ensure you’re getting the most for your bids; we’ll tackle that in a later post.

Situ­a­tion Condi­tion BUDGET Response CPC Response
Under pacing Budgets are maxed Raise Leave it alone 1
Under pacing Room to spend Leave it OR Raise 2 Raise 3
Over spend­ing Budgets are maxed Lower **after** lower­ing CPCs 4 Lower 5
Over spend­ing Room to spend Same as above Same as above

Detailed Explanations to the Diagram:

  1. If you raise CPCs at this point, you’ll raise the cost for each visit. But you’ll only get fewer visits because your budget still limits the amount of the (more expen­sive) traffic. That means that raising the CPCs will only lower traffic; you won’t get more clicks. In this situ­a­tion, you’re at capac­ity; you need to raise your capac­ity by raising your budgets.
  2. If raising the bids will enable you to hit your pacing goal, then leave budgets alone and only focus on CPCs (see next note). If it won’t, you need to raise your budgets as well.
  3. You can raise these if that will allow you to get more traffic. So consider which keywords will perform better (i.e. get more clicks) if you raise their bids. Look at your keywords that are not in posi­tion 1, but are perform­ing well in terms of conver­sions; if you raise the bids on these, you’ll spend more while retain­ing effi­ciency (i.e. you’ll spend more money to get more clicks while retain­ing your conver­sion rate.) On the other hand, if you raise bids on keywords that are already in posi­tion 1, they won’t perform better (how can they?); you’ll just be paying more for the same amount of traffic. The goal is to get more clicks on these keywords while main­tain­ing your conver­sion rate.
  4. If you drop these, you will accom­plish your goal of cost-cutting. BUT you aren’t taking advan­tage of the situ­a­tion. This isn’t opti­miz­ing with a fine tool; it’s chop­ping with a hacksaw.
    Consider this: If you lower the budgets only, you aren’t opti­miz­ing to see if you can get cheaper traffic, which would lower costs – which would get you equal traffic, for less cost, of the same general quality (i.e. the same conver­sion rate).
    So you should lower budgets, too – but only after you lower CPCs.
    In other words, this is a safety measure, but it won’t help your campaign perform better.
  5. If you lower these, you’ll lower your CTR (because you’re Avg. Posi­tion will drop). The quality of the traffic will prob­a­bly be similar than before (i.e. you’ll have a similar conver­sion rate), but since your bids are lower, you’ll be driving cheaper traffic. That means that you’ll be getting more traffic, because each click is cheaper. In other words, you’ll have a lower CTR, but you’ll raise your traffic. So you’ll have accom­plished your goal of drop­ping your cost, and have opti­mized to take advan­tage of cheaper costs.
    Even though you lowered your CPCs you should still lower your budgets as a safety net – that will ensure that you don’t spend more than your budget allows.