Rob Laver
Rob Laver Senior PPC Manager

Are monthly PPC budgets outdated?

Rob Laver
Rob Laver Senior PPC Manager

Pay-per-click is a reactive industry by nature, you put a campaign live and within a few hours you’ve got enough real time data to start making changes based on performance. It therefore makes it a great channel to test new products and respond to evolving user behaviour. But it’s also fairly unique in that sense, and that often puts it at odds with internal business process.

In an ideal world, you would treat media spend budgets in an entirely fluid way – increase them when things are going well, and decrease them when they’re not. Sounds sensible right? The trouble is, not all businesses have the luxury of being able to simply pluck a few extra thousand pounds when their agency or in-house team deems it suitable. So, by default, a maximum monthly spend is often agreed, and reviewed periodically. At its simplest, this leads to the following kind of month on month performance:

Spend is static, so conversions largely fluctuate based on conversion rate. That system obviously works well up to a point, which makes it popular. The issue is that it doesn’t play to PPC’s strengths as well as it could. Setting seasonal budgets based on historical data is certainly a step in the right direction, but what if you’re finding a particular week is unexpectedly performing well above the average? The time it takes to go back and forth agreeing the parameters of any increase in visibility can often mean the opportunity has largely disappeared. If it’s a specific day, it’s not really worth the trouble of starting that process at all. So you’re left with a dilemma – do you go more aggressive and then have to compensate for that later in the month to ensure you don’t overspend (a risk if conversion rate continues to go up), or do you let it pass by because it’s not really a viable option?

So, what’s the solution? One way forward is to view the marketing budget for PPC as a quarterly or annual amount, rather than monthly. Again, it won’t be suitable for everyone, but if you get your marketing budget agreed at the start of the financial year for example, and know at a minimum what you’re investing in PPC during that time, why not arm your team with the ability to increase or decrease the daily budgets more aggressively within the parameters of the overall pot? The outcome would start to look something like this:

The trend of conversions doesn’t change, but by having greater control over spend levels based on real time data, the peaks would become even more pronounced and the slower periods more efficient. For one of our clients, using this system led to an increase in conversions of 184% year on year over the last quarter, something which just wouldn’t have been possible without the ability to be more aggressive when we saw that conversion rate was spiking.

The approach which works best for you will ultimately be determined by return on investment and cash flow. The likelihood of unexpected changes in conversion rate is one which depends on your industry of course. But the recent online behavioural shift seen as a consequence of Covid-19 serves as a reminder to all businesses that anything can happen, and your PPC team need to have maximum flexibility when it does.

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