I encourage you to look at your digital advertising costs as an investment – you definitely get a return on your investment when you make informed advertising expenditures.
Conversely, if you try out digital advertising without knowing what you are doing, you are just throwing money away.
Estimating digital advertising costs is done on a client by client basis because it is dependent upon several factors, including what type of advertising – such as display advertising vs search advertising.
Here are a few factors:
- the micro market of the keywords you are targeting
- your overall budget
- the geographic areas you want to reach
- the advertising platform (Google, Microsoft, LinkedIn etc.)
- existing competitors in your market
- and more
You can see it is a very refined method of making sure your costs are reasonable for your situation.
With Pay Per Click advertising, it is auction style. You bid on how much you are willing to pay for leads.
I’m usually asked at this point, “what a click will cost”. Click costs are based on a lot of factors, so while I can estimate it, I just don’t know the exact cost of a particular click on a particular search phrase until we get into the bidding process.
The approach to bidding is proactive. I take you through a quick tutorial that looks something like the following example, on what you need to take into account when setting your budget for online advertising in the pay per click model.
For an example, if a business pays an employee $20 an hour and it takes them one hour to complete a job, and you charge $50 to the client, and you want to make $20 off of the job, we aim to spend less than $10 in advertising to get the work.
You pay $20 for the employee, $10 for the advertising, and get $50. So $20 profit.
So, if a click costs $2, and we estimate it takes 5 clicks on average to get a user to bite, the cost to acquire the work is $10. This tells us we can’t go over an average click cost of $2 in order to meet your profit goals.
Or, and this is where a professional Adwords manager can be valuable, you need to increase the rate at which you convince clickers to buy… maybe every 3rd click.
Some things I will help you to take into account when determining click bids:
- Labor cost
- Manufacture cost
- Acquisition cost
- Repeat customers vs one-off sales
Advertising is about averaging out your costs to acquire clients/sales. In collaboration with you, I’ll make sure your advertising cost is within your allotted budget.
Therefore, even though you don’t know exactly what an individual click costs when setting up your campaign, together we can evaluate click costs and make adjustments.
We simply turn off any ad phrases that are costing more than you want to spend, and focus on the ones that are within your optimal price range.
Then, as business picks up from the lower cost ads hitting their mark, we add in the more expensive ones with smaller profit margins. As long as some return on investment (ROI) is present, it is worth doing.
You Have Control Over Expenditure Levels
One of the nice features of internet advertising is that you can set a maximum daily expenditure.
Remember, it costs money to make money!
You will have these advertising costs:
- Keyword research
- Advertising account setup
- Monthly management
- Monthly click fees when someone clicks your ad
You may have these costs as well, depending on your situation:
- Web site analysis
- Web site optimization
- Web site expansion (ie creating landing pages)
- Ongoing keyword research
- Alternative Placement research for additional platforms
For as little as $300 per month over the course of the first year, you can see if it is for you — and it only gets better over time.
At a minimum, you will have $500 in startup costs, which includes keyword research, account setup, and first month management for a small (maybe ten-phrase) campaign.
More likely your business will have a slightly larger campaign and somewhere between $600 and $2,000 setup fees plus click fees (which are impossible to say until I know what industry you are in, and what your goals are; but remember, we set maximum daily expenditures on that).
What is the Range of Click Costs?
Click fees are competitive bids, so in depends on what industry you are in, what geographic market you are in, and how well you have done with click-throughs in the past.
They can range from about $1 a click to over $100 (most businesses, except for lawyers, don’t pay anywhere near $100). The tighter you stick to an exact descriptive phrase, the less expensive clicks are, comparatively to broad keywords.
Generally, the higher the profit prospects for the product or service, the higher the click cost due to risk reward theory. But not always.
What About Display Advertising?
Display network advertising, often called banner advertising, is similar in many regards to pay per click advertising. The main differences being:
- clicks cost much less because you are not dealing with people who are searching for your services, you are putting ads in front of likely-interested parties, and
- you can choose to pay per thousand impressions vs per click
Therefore you set budgets based more on how much you are willing to spend per month to show your ad, vs how much is paid for each click. Over time I will be able to determine what is a good expenditure and what is a not working as well, and shift budget towards the good and away from less effective channels.
What Should My Monthly Ad Budget Be?
If you have one key phrase, in a non-competitive environment, you may only need to spend a couple hundred dollars to beat your competition – but that doesn’t mean you will get every client out there if you don’t allocate enough click budget!
Also, the more search phrases you add, the more you will add to your budget. Or you may choose to stay laser focused on a few great terms if you have good return on investment for those phrases. The thing to keep in mind is to allocate enough initially to get a good feel for your market – we suggest at least $600 per month for most industries, but you can still be successful with a lesser amount.
Advertising Payment Policies
I set you up with your own ad accounts, and you “invite” me to be your PPC manager for the account. Therefore, the actual click through costs are billed to your credit card via the entity you are advertising with (Google, Microsoft, etc.)
You pay one month in advance for management fees, with ongoing fees invoiced at the end of each month, at either a set amount we agree on, or variable if our agreement is for management as a percentage of ad spend. Payment is due on receipt. Generally, my services pay for themselves in saved click fees (not to mention all the new business you will be getting).
Call 720-520-0639 now to get an estimate of your costs for digital advertising.
You can get a fixed monthly management cost.
You can choose from a couple of methods of payment.
1. PPC Management Based on Actual Time Spent for Servicing
With this method the monthly spend is dependent on four primary areas:
- The level of management
- The size of the account
- Your advertising goals
- The number and frequency of reports
So what determines your budget for “time spent” is the result of those four main elements.
2. Management Investment as a Percentage of Spend
Many advertising agencies use the “percentage of the amount spent” by the client on clicks to charge for management.
Typically that method is used for large sized accounts, spending over $10,000 a month. This could range from 10% to 25%.
The percentage of spend method is a carryover from traditional ad agencies who are used to charging a percentage costs such as production costs and insertion fees.
Feel free to call Jon at 720-520-0639 to discuss the intricacies of these methods, if you are interested in learning more. But, honestly, you don’t need to worry about all of that, I will keep it simple with a low monthly quote.
Bottom Line – Fair Monthly PPC Pricing
I can give you a quote based on the size, or anticipated ultimate size, and the other factors listed above and together we can determine if a monthly management based on hourly or percentage of spend is best for you.
Either way, I will provide you with excellent service at an excellent value with a fixed monthly budget. Then as your leads turn into clients you can invest more when it makes sense, up to your comfort level.
Call Jon at 720-520-0639 to get started.