If you haven't run a successful pay-per-click ( PPC) campaign yet, don't read this article.
Read this one and this one. Go create a successful PPC campaign, and then come back.
All set with that? Congratulations on your successful PPC campaign! Don't get too comfortable, though. Now isn't the time to slow down.
Your campaign provided two incredibly valuable things: a history of accruing new leads and revenue for your company, and a wealth of data to sort through. There's a lot you can do with both of those things, but we're going to look at only one next step today.
That step? Switching from a fixed budget to a flexible one.
What's the difference between fixed and flexible budgets?
Fixed budgets are based on predictions and, as their name suggests, cannot be adjusted.
Flexible budgets are adjusted based on a number of constantly changing factors.
Small to midsize business (SMB) marketing budgets are usually fixed. This can limit what SMBs can accomplish, especially in an age where marketing strategies shift across numerous channels.
Just look at PPC, where the risk of over- or underspending is even higher from month to month.
The effects of either can be catastrophic.
If you're in growth mode and are working to expand your business, the best thing you can do is transition to a flexible budget. That's going to require a change in thinking and focus.
Is a flexible budget right for you?
Flexible budgets offer a great deal of opportunity.
You can cast a wider net in terms of the keywords you invest in and utilize longer-tail keywords that produce higher quality leads due to their specificity.
You can give your marketing team a strong sense of autonomy, which in turn boosts their efficacy and morale.
However, there are some situations where a flexible budget isn't a viable or favorable option.
When is a flexible budget the wrong choice?
The larger your company is, the harder a flexible budget becomes. Enterprise-sized companies, for example, often lack the freedom to adopt a flexible budget due to their sheer number of varied departments and budgetary concerns.
SMBs, however, are more likely to encounter the following scenarios:
If you're looking to promote brand awareness rather than generate leads, focusing on cost-per-click (CPC)—and therefore a fixed budget—is preferable.
If you aren't able to scale up operations to meet an increase in demand, then you should reconsider a flexible budget and instead focus on improving your scalability.
For SMBs who are thinking about making the flexible budget move, it all starts with a shift in focus.
Changing your focus from CPC to CPA
This is one of those things that sounds simple in theory, but proves challenging in practice.
Rather than solely positioning CPC as the metric by which you determine your budgeting strategy, you have to look at cost per acquisition (CPA).
Alisha Evanson, director of digital marketing at cloud-based package tracking system Notifii, says:
"CPA is a more strategic approach - you’re adjusting your KPIs to reflect your true goals. Traffic is great – but focusing on the acquisition of new accounts is the end goal, so there’s much higher return in focusing on CPA instead of CPC."
There's an added bonus to this way of thinking. It helps various departments move toward a single budgetary thought process: Keep the CPA low, and grow the business while maintaining a positive ROI.
What goes into determining CPA
To calculate your CPA, include the cost of everything a potential lead does from click to sale, such as phone calls, video content, newsletters, etc.
All of these actions and marketing materials contribute to an eventual decision to buy your product.
Why you should focus on CPA and what that entails
With a CPA mindset, your marketing goals shift from raising awareness to generating leads and sales. The quality of the clicks on your ads becomes more important than the quantity.
Let's look at an example:
In your previous CPC-focused campaign, you directed your attention toward the most amount of clicks for the least amount of money. Even though you made a profit, a high bounce rate ate into your ROI.
With a CPA focus, your main goal is quality clicks: visitors who spend time on your site, clicking through and exploring your offerings. Time spent on your pages makes it more likely that visitors follow through on your calls to action (CTAs), turning clicks into leads and making them already worth however much you spent.
How CPA factors into a flexible budget
A flexible budget is necessary to account for the various factors that go into acquisition. One of the benefits of a flexible budget is that it gives you room to spend more money on your PPC campaign.
There are two reasons for this:
Reason 1: CPC is no longer the end measurement
If you're only looking at CPC, affordable clicks are everything. However, if you're focusing on CPA, a costly click doesn't break the whole bank.
A flexible budget allows you to spend more money on clicks. If that click turns into a sale, then the CPA overall is worth the increased cost. If that click turns into a bounce, then there's no further cost to your CPA beyond the initial click.
Reason 2: CPA ensures all your departments work together
A flexible budget means that various departments within your business don't have to answer to each other.
All of them act with a singular purpose: Minimizing CPA while growing the company. They don't have to worry about eating into another department's funds.
A flexible budget puts the universal goals for your company first, and the marketing team—or designated PPC overseer—can independently determine their bidding strategies.
What does the transition to a flexible budget look like?
Once your team is on board with a flexible budget, it's time to start shifting away from your fixed one.
But what can you expect that to look like? According to Josh Rubin, CEO of digital marketing agency Post Modern Marketing, it isn't an immediate thing.
The general rule of thumb I follow is to set up a new campaign with a maximum budget, and run and optimize it for several months. Once it's running quite well, and we know the general cost per acquisition, as well as the business' estimated profit margin, we can then change the campaign to a flexible budget and push the limits to get the best return. Once the performance on each dollar spent decreases, we can stop the budget around that point.
Here again, we see the value of thinking in terms of CPA rather than CPC. You have a wealth of data from previous PPC campaigns. Use this data to make initial estimates for your new flexible budget as you slowly transition out.
Then, use your new PPC campaigns to collect even more data. This information will inform the adjustments you make to the flexible budget along the way.
What type of data you should collect
Look to your old CPC-based campaigns, as well as your new and improved CPA-based campaigns for all of this transition data.
The data you should look at includes:
Load time for landing page
The time of year of the campaign
Bounce rate
Time spent on site
Conversion rate
The industry of your successful leads
The position of your successful leads
Any spikes in campaign efficacy
While this list isn't comprehensive, it's a good way to get a sense of how to analyze what your flexible budget will require, and whether you're making a positive ROI or underperforming.
How often should you adjust the budget?
Short answer: As often as you can.
Both Alisha Evanson and Josh Rubin suggest that you adjust the budget, based on your analytics, once a week ... at least. Evanson went on to suggest once a day.
That can become a strain on your resources if you don't have a person strictly designated to PPC management, so whatever schedule you set should match your business's capabilities.
What to do if a flexible budget is right for you
If your business is in growth mode and a flexible budget is the right call, you've got your initial next steps.
If you want more resources on both budgeting and building out your lead generation before you jump in, start here: