SMEs: how much does an AdWords marketing campaign cost?
As the owner of a small or medium-sized business, you often hear about AdWords. A paid search engine tool, it allows your site to appear at the top of Google results for certain chosen keywords — a highly coveted position for the visibility it offers.
But how much should you budget for a successful AdWords campaign? While there are numerous tutorials on how AdWords works, and the tool even offers the possibility of free testing, knowing what average results you can expect at what average cost is a more complex matter.
How does AdWords calculate its pricing?
With AdWords, as with most marketing platforms, pricing is not fixed. A click on a given advertisement can cost anywhere from a few cents to several euros, depending on many factors. But the 2 most important factors are:
- Competitiveness: the more competitors you have targeting a given keyword phrase, the more expensive the advertising will be.
- Ad placement: for example, displaying your ad at the top of Google search results (the first placement that comes to mind when people talk about AdWords) tends to be more expensive than displaying it in the Google Display Network.
To give an idea, the average CPC (cost per click) on AdWords ranges from €1 to €2 for a position on search results pages. However, it is worth knowing that AdWords does not offer a fixed rate: the tool operates on an auction system. You must bid for your advertisement, and when your bid "wins", your ad appears.
The more competitive a keyword phrase is (i.e. the more your competitors are targeting it), the higher the bids will be. In some cases, companies may even pay up to €45 per click for niche targets that promise a high return on investment.
However, cost is not the only factor at play in AdWords. When you launch a campaign, Google also assigns a quality score to your advertisement. In some cases, you can therefore win auctions with a lower bid than the competition. In this way, AdWords ensures that no company monopolises the top position simply because it has greater financial resources.
Calculating the quality score of an advertisement is quite complex, so we will not go into that detail today. However, it is important to know that poor quality will ultimately lead to higher costs. To obtain the best possible return on investment, you will need to target competitive keywords, create a quality ad, and plan a decent budget.
What budget should you allow for an AdWords marketing campaign?
There are several types of operating model for a paid campaign. The two main ones are:
- Cost per click (CPC): with this model, you pay every time someone clicks on your ad.
- Cost per thousand (CPM): here, you pay once 1,000 people have seen your ad (without necessarily clicking on it).
From a financial point of view, CPM tends to be less expensive. However, CPC delivers a better conversion rate; most of the time, you therefore end up paying less for clicks than for 1,000 views when you compare your returns on investment.
As CPC is more commonly used, there is far less information available on average CPM rates. We will therefore focus first on cost per click, and touch on the notion of CPA (cost per action) at the same time. Let's look at how much you can expect to spend to achieve a conversion or a click.
This varies from one market to another. Let's start with the most expensive, based on their average cost per click:
- Insurance: €46.78
- Loans: €37.72
- Solicitors: €40.10
- Credit: €30.72
- Hotels: €27.18
These sectors are particularly costly because they offer the potential for an enormous return on investment, notably with customers who pay on a recurring basis. A single conversion can therefore lead to multiple monthly payments.
We have already mentioned that the average CPC is around €1 to €2; this clearly shows that the sectors we are discussing here are truly exceptional markets.
To get an idea of the budget to allow for advertising, by cost per click, on a specific keyword phrase, the SEMRush site gives you an overview. The tool is paid, but allows 10 free searches (10 keyword phrases) with a free account.
For each keyword phrase analysed, SEMRush provides an estimate of the cost per click and gives access to related keyword phrases and their CPC as well.
What is the average CPA for businesses?
But CPC alone is not sufficient to indicate the average budget to put forward. This is where CPA — cost per action, or per acquisition — comes in. Because a click does not necessarily lead to a customer acquisition.
Across all sectors, the average cost per acquisition is €51.11. For example, by spending €17 per day, you might expect one conversion every 3 days. However, this also depends on the cost per click, your sector of activity, and the keyword phrase targeted, among other things.
Ideally, aim for at least 100 clicks for a given keyword phrase. This will allow you to gather enough data to determine whether your target keyword phrase is worth all your effort and which of your ads performs best. This can represent a real investment, but you will need this information. Without it, you are running your ads blind, hoping that one of them will work.
How do you manage your AdWords campaigns?
You will need at least €80 to €180 (£70 to £160) to carry out these tests on each selected keyword phrase in order to obtain meaningful data. This represents a significant amount of money, so you will need to be careful about how you spend it.
Ideally, you should not use your entire budget in a single day. This can be tempting if you are looking for quick results, but many factors can affect your conversions. For example, your target audience may prefer to make purchases at specific times, during specific periods, or on specific dates.
Prefer to spread your budget over at least a week or two. Think of this as a testing phase, which will help you gather important information for the success of your campaign. Once you know which ad is most effective with which audience, you can target that audience specifically. This should bring you more conversions and a better return on investment.
Fortunately, AdWords provides advanced targeting tools and daily budget management. You can therefore configure your campaigns to launch automatically. All you'll need to do is check reports regularly. If you see that a campaign is not generating results quickly enough for your liking, you can stop it and return to the configuration panel to modify or delete it.
Running online advertising campaigns can be quite costly; some businesses spend hundreds or even thousands of euros per day on AdWords. However, you can achieve good results with more modest budgets. Before you start, we advise you to establish how much you can afford to spend on AdWords and stick to that amount, at least initially.
As a reminder, in most cases you should aim for €80 to €180 per keyword phrase when paying on a cost-per-click basis, in order to determine whether your ads are effective. If they are not generating a return on investment at this stage, you may want to rethink your strategy.
Translated from Elegant Themes
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