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:
- 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.
- 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.
- 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.
- 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.
- 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.