How Much Should Local Businesses Spend on Google AdWords?
You might attribute Google Ads (formerly known as Google Adwords) fees to other advertising channels. For example:
- A radio spot costs the same no matter your industry
- Banners along the highway cost the same whether you’re a dentist or sell socks
But it doesn’t work this way on Google Ads. Instead of having set costs, Adword works more like an auction marketplace. The commodity that Google Ads sells is website visitors. Your costs will depend a lot less on the channel itself and more on your industry.
The Answer Is: It Depends
One might think that ad spend is being invested in Adwords, but really you’re spending money on mini-markets within Google Ads. For example, each of your keyword groups will come with its set of prices and factors to consider.
Similarly, when you bid for clicks or website visitors in Google, you’re not bidding for the same clicks as everybody in the world. You’re only bidding on the clicks that are relevant to you and your competitors.
Since Google Ads is a keyword auction site, finding an adequate budget will depend on the cost of the keywords you want to bid on. If a lot of advertisers are bidding high on a particular keyword, the bid for this keyword will be higher than others, increasing your budget. This will vary wildly, depending on the industry.
Minimum Amount you Should Spend on Google Ads
There is no minimum spend on Google Ads, but it’s nearly impossible to benefit from a $2 or $5 as a daily budget. Over the years, our strategists have regularly heard the following argument:
“I just want to test with a small budget, and if it works, then I will increase my budget.”
The theory behind this makes sense, but the platform isn’t designed to render results this way.
If we compare this to traditional advertising, it’s like buying a small classified text-based ad in a newspaper. If you get any results from that tiny ad, then you will buy the big full-page ad.
The logic that the small, inexpensive ad has to produce results to buy the bigger, more expensive, and more efficient ad is flawed at its core. The more expensive something is (especially when the pricing is auction-based), the higher value it should have under ideal circumstances.
Note: As you acquire data, aim to reach at least 6 clicks per day. If you sell car insurance, the average CPC might be, roughly, $25. In this case, you would need a budget of $150 per day to achieve those 6 quality clicks.
Recommended Monthly Budget You Should Allocate to Google AdWords
Depending on the client, industry, objectives, and locations targeted, our strategist recommendation for starting budgets range from $1,000 to $10,000 per month.
The better equipped you are to build and optimize Google Ads campaigns, the higher your starting budget should be.
If you’re starting with your business for the first time and have never used Google Ads before, you should go for a low budget that still allows you to be competitive. If you have had some experience with Adwords consider a higher budget.
As you increase the money you spend, you’ll get the clicks you’re looking for; with this will come more data to work with. And if there is one thing that you’ll find valuable, it’s data.
One Big Investment Over a Quarter or a Minor Investment Over a Year?
Another common mistake is investing in a small monthly budget without increasing it over time. Perhaps over a year, it may sum up to $12,000 with little to show for it.
If they had taken those $12,000 and invested them in a single quarter ($4,000 per month) it would have resulted in:
- A shorter time frame to evaluate whether an advertising channel will produce workable results or not
- The ability to compete on even terms with other advertisers
Some industries are notorious for having keywords with a very high cost per click, upwards of $30-50 PER CLICK! Though this isn’t common, the following are industries where you can run into a few of these:
- Financial Services
- Pest Control
On average, the keywords for these industries range from $10 to $30. Ergo, $1,000 per month campaigns won’t generate noticeable results. You may even categorize Google Ads as a non-functional marketing channel. But the truth is that you didn’t have the right information for proper set-up.
How to Find Out How Much Your Cost Per Click Will Be?
If your CPC costs and budgets are based on upper-funnel keywords, you may be creating some confusion. Upper funnel words are cheaper as they do not show buying intent. As you travel down the funnel and closer to purchase intent, this will change.
The right keywords – the ones that attract new customers – are more expensive than other keywords.
For example, if you are a cleaning company you shouldn’t use the keyword cleaning, instead, go after keywords that are more specific and have a higher intent to purchase like:
- Cleaning company Miami
- Housekeeping services
- Maid pricing
These keywords are more expensive because they are in high demand and more competition. Keywords are popular when they have a higher ROI associated with them.
A potential customer is much more likely to be looking after an actual cleaning company if they use keywords like cleaning company in Miami vs. keywords like cleaning, maid, etc.
Difference in Cost Per Click Between Keywords With Intent to Buy and Informational Keywords
As mentioned before, where you are in the buying funnel will influence CPCs within the same industry.
For example, let’s assume that you are a local cleaning company. The first list of keywords represent keywords that are typically used in search queries to find more information:
- Cleaning jobs = CPC $3.23
- Salaries as cleaning lady = CPC $2.18
- Cleaning supplies company = CPC $2.39
At the same time, if we review the average CPCs for keywords that are typically used in search queries with high intent, then the cost per click goes up with more than 1,000%:
- Cleaning company = CPC $12.23
- Cleaning company Miami = CPC $12.38
- Local cleaning company = CPC $13.05
That’s why it’s so important to base your cost-per-click and budget on the right keyword list.
Note: If you are a cleaning company and don’t recognize the CPCs listed here, then remember that there are differences in prices based on your Quality Score, geographical targeting, and ad position.
How to Think Of Your AdWords Costs As An Investment vs. Expense
One of the most significant concerns among new advertisers is Google Ads fees. Many of them are concerned that it will cut into their existing profits.
It’s common for advertising to be considered an expense. However, it’s not to be seen as something that takes revenue away. Instead, it’s an investment that will bring income.
The way to turn an AdWords budget on its head from an expense to investment is by tracking it.
Tracking will help you understand what you get out of your investment. Some examples of how to do this on your campaigns are:
- Conversion tracking
- Ecommerce tracking
- Transaction tracking
- Lead form tracking
- Call tracking
Will AdWords Be A Good Investment?
In our office, this is a fun question to answer. If you’re considering AdWords, if you have a good business, then Google Ads will be a good investment.
You need to take your website, industry, and competitors into account, but it’s much easier to advertise for a good business than bad business.
If you haven’t succeeded at various advertising models, can’t seem to get word-of-mouth business, and are scraping to get by, Google Ads isn’t where you are going to turn your business around.
If your business is doing well and your customers have a clear understanding of what differentiates you in the local marketplace, then Google Ads will be one of the best decisions you have ever made in your business life.
As we wrap up, take the following notes back with you:
- What you’re going to spend on Google Ads depends on what industry you’re in
- The required ad spend fluctuates a lot from industry to industry
- When calculating your costs, remember to use the right keywords
Your Google AdWords spend needs to make sense to you. What the platform offers is valuable to a business that is ready for the buzz, traffic, and demand that it will bring.
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