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Sunday, December 21, 2008

AdWords Budget Settings and the Impact on Conversions

AdWords budget settings are one of the most important yet often overlooked settings in an AdWords account. A lot of people write the budget settings off as nothing more than a simple mechanism you can use to make sure you don't spend more than you have available. True, you can use the budget settings in AdWords in that way but I think it's important to understand the implications of those settings. I'll use an account I recently reviewed for an associate of mine (let's call him Jim) as an example of what I mean.

Jim runs a small business and sells a few of his smaller "shipping friendly" products on his website. He's been using AdWords for about a year and half. Jim's self taught and has never been any formal AdWords training or hired any outside help. That said, his AdWords account has steadily grown in terms of importance to his business over the past 12 months as it's continued to bring more and more customers within his target ROI. Jim called me because he felt like he had hit a wall..."no matter how many keywords I add I can't seem to push past X number of sales per month and I know there are more customers out there." Jim asked if I would take a look at his account and see if I could offer any advice that might help. I agreed and he gave me access to his account.

I was shocked, and the folks reading this post that manage campaigns for a living will understand why. Almost all of the accounts I've looked at for friends, associates and small/large businesses over the years have been disasters. No organization or logical campaign/ad group naming, match types all over the place, no negative keywords with broad match, 1 landing page for 5,000 keywords, no ad testing, geo targeting the entire planet, content running with search, etc, etc. If you manage campaigns for a living you know the drill. I was shocked because almost none of that applied to Jim's account.

Jim's spent time - a lot of time - studying AdWords and best practices. He spends as much time as possible reading various resources for ppc practitioners and the time he's spent learning really shows in his account. It's well organized and follows a lot of what are considered best practices. A separate set of eyes never hurts though, and I was able to put together some suggestions for him that should help his accounts performance. Before he implemented any of my suggestions though I asked him to do one thing....

Raise his daily budget from $160 to $5,000 and change ad delivery from standard to accelerated.

Jim, like a lot of small business owners, decided what he was willing to spend each month and did the simple math to arrive at a daily budget. His campaigns were capped at $160 a day and ad delivery was set to "". His account was always hitting the spend cap by the end of the day and it was obvious there was a lot of additional search volume out there he was missing out on. We had some conversations around "what ifs" associated with the budget increase and Jim realized one of those what ifs would be great for his business - what if he could spend $5,000 a day at the same ROI that he was spending $160?

I told him I didn't think his current account would spend $5,000 a day but I was sure it would spend a heck of a lot more than $160. His account setup was solid so I was also confident in the fact that he would see the same/similar conversion rates and ROI at those increased spending levels. He said he would put the budget change in place and we scheduled a follow up two weeks later.

Fast forward two weeks - Jim was ecstatic. He was not spending $5,000 a day but since the change his account was averaging $600 day and his conversion rates and ROI were at the same levels they were when he was spending $160 a day. He use to average about 10 sales a day but since the change was averaging closer to 35 sales a day and one day had even broke 45. He did not change anything else in the account, just the budget settings.

My philosophy on account management has always been to build accounts out to the point where I'm setting spending caps to stay within client budgets. This allows for quick growth when the client is ready. If I'm capping spend at $500 a day and a client wants to increase their budget there's no mad dash to build out keyword lists and expand the account, I just up the budget and let the system do the rest.

The AdWords budget settings are important...don't let artificially low settings limit your accounts potential.

Here are a few other AdWords budget related posts & pages that are worth a read:

AdWords Monthly Budget Now in Expanded Beta, Pros and Cons

AdWords Daily Budget is Actually Monthly Budget: False Advertising Claim Proceeds

AdWords Help Center - Budget

How You Control Costs - AdWords Learning Center


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