Recommended ppc spend

[corn2015]

Hi,
Is there an industry recommended percentage of total overall marketing spending that should be dedicated to PPC or does it vary by industry?

[EGOL]

I never trust "averages" or "recommendations", and I especially don't trust any numbers published on PPC success or failure.

Why?

PPC success is based upon a huge number of variables. These include: cost of good sold, profit margins on goods sold, shipping costs, bidding levels, conversion rates, traffic levels, and most of all time.  Very few people who own businesses know their real profit margins and when you go to the people who run the PPC programs, very few of them even know or care about costs of good sold, profit margins, shipping costs and more. They are blissfully bidding with your money.

And, on top of those numbers, clever ad writers, great landing page optimizers, great price setting strategies, and A/B testing all have a huge weight in the success of PPC.  Your competitors force their pricing onto you and if you are not the low price seller, lots of the clicks that you pay for will leave your site.  If you are the low price seller you might not be making enough profit to offset your PPC spend.  All of these things have their associated numbers.

So, all of these people, not knowing these numbers, could be blissfully losing their shirts (or their clients' shirts) and never know it. If they are not doing the math, they don't know, and most of them don't know that they don't know, or even care about "knowing".

I can say for a fact that I have really done this math.  I like math.  And, I can say with confidence, that it is really really hard to make money using PPC.  You are up against companies who have extremely low merchandise costs, extremely low shipping costs, extremely low labor costs and highly efficient systems of all types.

To answer your question.  No, there is not a recommended percentage that you should be spending on PPC.  That is a good way to blissfully lose your shirt while thinking that you are doing best practice.

Do the math.   Like me, you might decide that your PPC spend should be ZERO.

[ClaytonJ]

No - there is no industry benchmarking.  It is a matter of budget and value proposition.  EGOL is correct in many instances PPC is a spend that does not appear to deliver on its value proposition.

That said there are always instances where PPC is a benefit. It is simply a matter of tailoring your PPC to your clients/websites needs. If you do not have much traffic then PPC is great because you can load up on traffic for two weeks - then analyse how the customers interacted with your site. Learn about consumer behavior. Find out site weaknesses.

Long tail "purchasing" keywords may deliver sales. Owning your "brand" maybe needed whilst you search for rankings. PPC is a valuable tool in the tool kit however it is just that a tool. You need to think about above the line advertising as well and branding your website.

In short do not discount PPC but do not over rely on it. Ranking your organic search results is the best method, but that takes time. The one thing I do know is that companies that focus on PPC to the detriment of all other mediums for advertising - invariably fail.

[irapasternack]

I'd say it not only varies by industry, but also within industries. We manage PPC for urgent care centers all over the U.S. In some cases, a single location can spend a few hundred dollars per month and be in great shape. At the same time, others spend thousands per month. Even neighboring locations of the same brand can have significant differences in budget needs.

I'd say this would go for any type of local business. Since the competition and demand can be very different from one locality to the next, the advertising needs vary widely.  Throw in variables such as the goals of the owner and the age of the business, and coming up with any type of rule of thumb gets more and more meaningless.

Hope this helps,

Ira

[JasmineA]

Hi EGOL,

I see that you have quite the opinion on SEM! I think you have some really great tidbits in your response (like not trusting published recommendations because it can be coming from someone like Google who just wants your money, recommending to do the math before new advertisers dive in, and that there are too many variables to determine if you will be profitable your first go). However, there are a few areas that I think are necessary to provide an alternative opinion on for the sake of discussion and public information.

I was completely in agreeance with you until you mentioned that people who run SEM accounts don't care about profit margins and business owners barely know their own profit margins. I've been working in paid search for 5+ years and never once have I ever met a business owner or dedicated paid search specialist who wasn't concerned about their profits and overall business impact.

I'm glad that you've done the math and have decided that it isn't going to work out for your business, but there is a lot about PPC that doesn't fit well with the math - unless you assumed a 10 QS for every KW and your product still doesn't sell in that atmosphere. As you gain positive account history, you essentially get "discounts" on your bids. From my experience, the Keyword Planner is only a tool to give you a general idea of what you will need to bid and rarely have I seen my actual bids match exactly what the planner suggested - they've been both up & down on the suggested CPC. It's very difficult to assume profit or volume of conversions in a system that is very fluid.

As you've already mentioned, when working in PPC it's very possible the target market can be quite competitive. If you're in a competitive niche it will be harder to turn a profit on a per-product basis. And even that has conditional standards against it, like how large your orders are, how many times you have return customers, how optimized your PLAs are, if you're driving the right traffic to the right pages, your conversion funnel. If you make it difficult at any piece of the process then PPC is going to be costly because the experience is poor and competitor experiences are likely much higher quality.

I agree that there are many opportunities for failure, however there are just as many times PPC succeeds - or else companies wouldn't continue paying for traffic or putting $500,000+ a month into Google AdWords.

This is also a question from someone who is interested in experimenting and seeking generalized recommendations for how much to spend with no inclination to their intended market or vertical. Things that may not work for one company might work incredibly well for another.

I appreciate the comprehensiveness of your response on the aspects of what make PPC hard, but I definitely challenge the notion that it's not worth investigating.