Subscribe to join thousands of other ecommerce experts
Many advertisers are struggeling with the same restrictions: There is only a fixed monthly budget for participation in the Google Adwords auctions.
But which options to advertizers have to determine budget allocation and which option is the most promising?
Option 1: Limited daily budgets to advertize the whole month (with standard ad delivery)
This option creates limited daily budgets who sum up to the monthly target expenditures. Hence the adverts are active the whole month. An important topic here is the determination of ad delivery. If you choose “standard” the advertisements are randomly displayed (or not) over the course of the day depending on your available budget. With a restricted budget of 50% of possible expenditures, the advertisement is randomly displayed with a chance of 50%. At 10% of possible expenditures, there is a 10% chance of the ad beeing displayed. Hence, the ads are shown over the course of the day with a percentage chance for delivery.
Option 2: Limited daily budgets to advertise the whole month (with accelerated ad delivery)
This option works analogous to Option 1, just accelerated delivery is now chosen instead of standard delivery. This means that advertisements are not randomly displayed, but delivered until the budget is depleted. This is a clear difference to Option 1: If you record higher conversion rates specifically in the evening hours, you should by no means chose this option. The same holds reciprocally when higher conversion rates are recorded predominently at the beginning of the day, this option should be preferred over standard delivery.
Option 3: No limiting daily budgets to enable an equal ad display rate
Choosing this option, no limiting daily budgets are created. Thereby ad placement takes place over the whole day and the budget constraint only holds over the course of the month. In case you do not observe differing conversion rates over the course of a month, choosing this strategy should lead to the same result (respectively the same performance) as the options above.
Option 4: Lowering offers or pausing keywords (based on CPC or Cost-per-Action)
This option is the most promising but also the most elaborate. The budget is controlled over reduced click costs, to reach the maximum of clicks per conversions for the defined budget. This is faciliated by downbidding of keywords with bad relations – possiby resulting vacant budget can then enable further set up of top performing keywords. Hence, with a monthly fixed budget, the marker of a campaign with “limited by budget” is always a strong indicator for possible imrovements of profitability.
Should an advertiser focus on clicks (which, as we must remark, is not favorable) the budget manager in the Google Adwords interface may be used. It adjusts the bids in a way, to also reach the maximum clicks for the monthly budget. At least to a certain extent.
Another option: flexibilization of the budget
You should most certainly have contemplated this option at least once. If it is known for an advertiser how much a click or a conversion (= order, registration, etc) is worth for him, the budget control can be adapted to employ exactly the amount needed to not exceed the target value, for eample CPC or CPA (Cost-per-Action). Another, more sophisticated approach would be the optimization of the CPA-conversion rate, which tries to increase profits. This is achieved by lowering the average CPA, by primarily downbidding expensive keywords (with respect to CPA).
The following thoughts will be helpful to further grasp the idea: With a limited budget amounting to € 3000 a month, the first converion is just as expensive as a conversion that is generated with € 10 after € 4510. Hence, if the value of a conversion of a customer is known and the costs of a conversion are below this threshold, it makes no sense to limit the budget.
Budgets should not be limited by daily or monthly budgets. If an advertiser does not clearly know how much a conversion is worth to him, the budget can be limited, in which case option 4 should be preferred. As a better variant it can be recommended to start an analysis and find out how much a conversion by Google Adwords is worth, for example based on Customer-Lifetime-Values.