For first-time advertisers, it is common to have a fear of spending money on AdWords but not getting any results. Unfortunately, they become so careful with their initial budget that it is insufficient to explore all of AdWords' features (e.g. Display and Remarketing) and the budget gets exhausted early in the day - never fully able to reach the majority of the target audience. Because of their over-cautioness, that fear of AdWords not working for their business becomes a self-fulfilling prophecy.
Instead, advertisers should allocate a reasonable budget to test AdWords fully for 3 months, then if it doesn't work, at least you know for sure that you've tried your best. Otherwise, you're only going to waste your hard-earned money, time and effort (ours too) if you make a half-hearted attempt.
How Expensive Are AdWords CPCs?
Depending on your industry, the cost-per-click (CPC) can range anywhere from less than S$0.10 a click to over S$10 a click, as illustrated in the sample keyword list above.
Is AdWords Too Expensive For My Business?
Let's take the example of a fitness club. Assuming the average CPC for gym-related keywords is S$1.50, and out of every 100 visitors to the website only 3 converts, the cost-per-conversion is:
S$1.50 / 0.03 = S$50
An acquisition cost of S$50/member seems expensive at first, but lets assume the average profit from each member is S$30 a month and each member stays with the club for at least 2 years, the profit generated per member is:
S$30 x 12 x 2 = S$720
This number is known as Customer Lifetime Value, i.e. the nett profit you make per customer.
Now the acquisition cost of S$50 per customer doesn't seem so expensive anymore, right? And we have not even taken into account the intangibles, like the branding and awareness AdWords gives you, and the likelihood of the satisfied customer recommending their friends to join the club.
How Much Budget Should I Allocate?
It will largely depend on your industry's average CPC and search volume. Let's say you offer company secretarial services, have an average CPC of S$3 and the the monthly search volume is approximately 10,000 searches. Assuming a CTR of 3%, the following monthly budget should be sufficient:
10,000 x 0.03 x 3 = S$900
AdWords provides an easy way to measure Search Impression share, an indication of how often your ad is showing. If your Search Impression share is too low, you should increase your budget.
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