Bidding and budgeting basics with Google AdWords

Video: Budgeting for your online advertising

To create the right AdWords budget for your business you'll need to:

1. Determine your business goals
   
2. Calculate your daily budget
   
3. Determine your cost-per-click (CPC)
   

1. Determine your business goal

What do you want to achieve by marketing your business online? You may have several goals, but pick your top one and be as specific as possible. For instance: Sell 200 decorative lamps by Christmas.

Knowing your business goal will help you determine the answer the questions: How much is a click from a customer worth to me?

2. Calculate your daily budget

Unlike the traditional way of setting a marketing budget, which is by month, quarter or year, with AdWords you set a daily budget. This gives you the flexibility to adjust your budget or even pause your campaign completely at any time. It reduces the risk of committing big budgets in advance and allows you to quickly act on market trends, potential supply issues or a change in business strategy.

The easiest way to calculate your daily budget, is to decide how much you want to spend per month and divide it by 30. For instance, if we decide that R400 will be our total monthly budget, we can set our daily budget at around R14 and run our campaign for almost an entire month for free.

To view your recommended budget or edit your current budget and account settings, visit the Settings tab of your campaign.

3. Determine your cost-per-click

Now that you've determined your top business goal and calculated your daily budget, determine how much to spend for each click on your ad - your cost-per-click (CPC).

Your CPC bid specifies the maximum amount you're willing to pay each time someone clicks your ad. While your daily budget will determine how many times your ad is shown per day, your CPC will determine your ad position and your profit margin.

Choosing the optimal CPC can take some time and experience, and expert marketers will continually adjust their bids to make sure they're always getting the most bang for their buck in the face of their competitors. But the good news is, AdWords has some great tools to help you quickly and easily pick the right bid for your first campaign.

AdWords Traffic Estimator

If you are new to online advertising, or you're unsure of how much you should bid per click, you can use the AdWords Traffic Estimator Tool to find an appropriate bid per click. The tool will recommend an amount that compares favourably to other businesses with similar keywords to yours.

• Visit adwords.google.com/select/KeywordToolExternal and select the Traffic Estimator tool from the top left.
  
• Enter 5-10 keywords or terms related to your products or services. For best results, choose 2-3 word keywords related to your products or services (e.g. 'black leather sandals' rather than just 'sandals'). For keyword suggestions, check out the Keyword Tool.
  
• Enter the maximum CPC that you're willing to pay each time a potential customer clicks on your ad (as determined by your business goal).
  
• Once you click Estimate, you'll find an estimated number of monthly searches, average CPC (the amount you'll actually pay per click), ad position, daily clicks, and daily cost for each keyword. You'll also find a summary of your estimated total clicks and costs. Raise or lower the CPC or daily budget to see how results may vary.

Automatic bidding

If you want the most clicks as possible, but don't want to spend time adjusting your bids, try automatic bidding. This bidding option can help you get the most clicks within your budget.

With automatic bidding, you don't need to specify individual bids for keywords. You just set a target 30-day budget, and the AdWords system automatically adjusts your maximum cost-per-click (CPC) bids on your behalf.

You can change your bidding option to "automatic bidding" under your campaign settings.

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