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.

Sit­u­a­tionCon­di­tionBUDGET ResponseCPC Response
Under pac­ingBud­gets are maxedRaiseLeave it alone 1
Under pac­ingRoom to spendLeave it OR Raise 2Raise 3
Over spend­ingBud­gets are maxedLow­er **after** low­er­ing CPCs 4Low­er 5
Over spend­ingRoom to spendSame as aboveSame 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.