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Budgeting Tips for 2019 and Beyond
Produced by Hanapin Marketing
Having trouble smoothing out your budgeting process? Hanapin’s Diane Anselmo and Acquisio’s Marc Poirier teamed up for a webinar outlining some helpful and timeless tips as you plan for 2019 and for years to come. We answered the questions we all have running around in our minds come budget season, so we hope it helps you develop seamless budget allocation in the coming years.
How do you start out thinking about the PPC budgeting process at the beginning?
There are two big parts to budgeting: Firstly, getting the money. You’ll need to decide how much you need for a year. Secondly, you need to figure out how you’re going to allocate that money. That’s the 30,000-foot view, but of course there are a lot of complexities that go into those two parts. With all the controls we have in paid search now, it can be difficult to decide ahead of time what you’re going to do.
When you think about budgeting, how far out should people plan ahead?
A smaller period of time is better. If you can build out your budget quarterly that’s great, because then you have more flexibility. But typically people plan out a year ahead of time.
What’s the minimum you’d increase your budget per year to keep up with competition?
Competition is only getting fiercer, so you have to take that into account with your budgeting. You definitely want to keep an eye on your competitors – are they stepping up their game? A great way to keep track of them is to use a tool like SEMRush or SpyFu to give you some insights on the competitive landscape in terms of the keywords and ad impressions that you’re trying to capture. If more of their ads are taking up more and more space, you might want to consider bumping up your budget.
Now determining how much is the hard part. There’s always going to be an annual increase in CPC, so make sure you plan for that. If you’re not capitalizing on the available ad impressions and haven’t been over the past year, you want to add that into your calculations as well. For example, if at the end of the year on your best assets you’re capturing 80% of your impression share and you want to advertise the same things in the coming year, it might be a good idea to allocate more budget there. Know your own impression share and what the gap might be, and set aside money for if your competition steps up. Although it may be easier, try not to just keep the same budgets all the time.
However, if you increase your budget too much, you’re going to end up trying to spend all of it. You’ll be in position 1.1 for every keyword that’s running, and you’ll end up paying top dollar for everything. Which means, that your cost of acquisition will go up and if you don’t keep that in check you could find yourself in a bad business situation where it doesn’t make sense anymore. Make an increase year over year, but don’t go crazy.
What about when people budget too little? Where are people not giving enough budget?
People tend to invest their money in the places that they’re really comfortable with. So, a lot of the time the trend is to give all the money to Google. Here’s the problem with that strategy – if you put all your eggs in one basket, you’ll keep even the worst performing campaigns because you haven’t created new opportunities for yourself to generate value.
Others that we see put their entire digital advertising budget in paid search, with a tiny amount to do anything else. The issue with that is that you’re just picking up the low-hanging fruit – these people are already searching for what you have to offer. Sure, that’s easy, but you’re not generating brand or demand or participating in the entire ad funnel, so you’re leaving a lot of opportunity on the table.
Let’s take display for example. We see people take a chance with display, a top of funnel advertising channel, and their sales increase, and everything is going in the right direction. But there is a cost to it, and when times are hard the first thing that is going to go is the display ad budget. But when that goes, everything goes. It makes sense to rationalize your spending, but there is a lot of exploration for PPCers to do outside of Google Ads.
Try removing your worst performing campaigns from Google Ads account and reallocate your budget into testing your best assets on Bing Ads or another platform. Typically people invest too little in the things they don’t understand, or the new platforms haven’t “proven” themselves yet, so people refrain from putting their budget there.
What about companies who have multiple brands? How do you allocate budget then?
One particular client Hanapin works with, who has multiple brands, has specific divisions. We budget for each division, but then we look at performance as it’s happening. If we see we have 5 brands in this division and we see that one brand is doing poorly, we have the flexibility to reallocate budget to another brand in that division that is performing well. Sometimes when there are multiple brands there can be overlap, but you want to make sure you’re putting your budget where you’re going to get the most return.
Let’s dive into the process. How would you outline an ideal budgeting process?
The first step will depend on what you already know – is this the seventh year that you’ve run this budgeting process? Or is this the first time? Having historical data and a good understanding of the business is really important. Start with the business fundamentals and understanding the unit economics behind it – how much does it cost to make this product? What do the margins look like? Gain an understanding of where the priorities lie and what has been proven to be the most effective in the past os that you can focus.
Having a really good understanding of business fundamentals, knowing the targets for the year in terms of sales and revenue and margins, and understanding the resources available are vitally important. In addition to the media budget, what else do you have? People to help you write ads? Creative assets sitting somewhere?
If you’re handling all the digital ads, make sure you understand the roles of everything – what you’ve seen historically in previous budget distributions, the attribution models that have been used, what you’ve seen in terms of outcome and using that to model what to use for the year to come. Look at the historical average of CPC and CPA, seasonal trends, etc. to influence what you do in the coming year.
So after gathering as much information as possible, the second step is to define the strategies for the year. What is it that we’re trying to accomplish? For example, if you want to increase awareness for a product by 300%, how are you going to do that? Make sure you have a strategy that your team supports and is aligned on.
Thirdly, think more specifically about how you’re going to achieve your goals. What audiences are you going to target? In what areas? What time of day/day of week? Do I want to run GDN campaigns in addition to search? Do I want to run Facebook campaigns? These things all complement each other, and it’s important to think about the tactics behind your strategy.
Lastly, once your plan is together, go get the money. You have to sell it to your boss or your client. Be prepared to answer their questions, and explain why you need this budget.
What kind of tools do you suggest for budgeting?
Like we said, you need to have historical data when planning your budget. So to start off, you’ll want to use Google Ads to look at your past data. Google keyword planner, sales reports from your CRM system to see where the money came from in the past, Google trends to see how things are shifting throughout the year, Google Auction Insights, tools like SEMRush, SpyFu and other competitor analysis tools, and Google Sheets or Excel.
Competitors really do affect our budget. How much should we be considering them?
Knowing who your competitors are and what they’re doing is important. Public companies are great, because you can keep track of their progress. When you don’t have public companies as competitors, you can use Google Alerts to keep track of them if they make an announcement.
Alexa is a tool you can get traffic trends from. Additionally, you can follow Forrester or Gartner who follow your competing companies – they often interview the CEO and publish that information, so you can keep up with the company strategy. Follow your competitors on social media and check out review websites like Yelp to get a sense about what people think about the brand. And don’t be afraid to ask your customers about what they liked about the other products!
From there, you can probably guess that when you competitors are about to launch a new product, that they’ll put extra budget behind it to promote it and then step up your game to compete with it.
Google Auction Insights can show the competitors that are bidding on your keywords, and can show you trends and more clarity into what areas you need to be investing more. If need be, you can set aside budget strictly to compete with others who are affecting your performance. Note that oftentimes, the threat of your competitors “eating your lunch” is the greatest persuasive factor to obtain the budget from your boss.
How do you forecast results based on budget?
That’s tricky. You need to have done it before or have a lot of experience. If you have no data and no experience it can be tricky to plan the outcomes.
If you have some insights, work backwards from the objectives and come back to your budget. Test the safest assumption and go from there – you don’t want to take a risk and find yourself blowing your entire budget. Do your best to validate those assumptions with historical data. Additionally, if there are a lot of changes going on at once, make sure you test one thing at a time.
How do you make sure you have enough budget planned for new strategies that come up spontaneously throughout the year?
Do not fully allocate your entire budget at the beginning of the year. Plan 80% of the budget at the beginning, and keep a “secret” 20% tucked away for situations like that. If what you’re doing is working and a new opportunity comes up, but you have your entire budget distributed and you didn’t plan for it, you don’t have any flexibility to go after that opportunity. But don’t worry, you will spend that 20%.
Have these thoughts before you budget, so you don’t find yourself in a pinch throughout the year when unexpected situations arise.
How do you track the assumptions you made during the budget process throughout the year?
Start the year saying what your targets are for each quarter, and have an assumption for each campaign in terms of output, and the cost for all of those campaigns. Put them in a spreadsheet with a column for each year, and KPIs in the rows. For each month, have 3 sub-columns containing your assumption, your actual results, and the delta. You can clearly see your performance compared to your assumptions.
What are some common reasons that budgets need to change during the year?
There could be many kinds of reasons, but if priorities change in your company that can definitely affect your budget. You’ll also need to adapt to any external factors that happen with your competitors or the landscape, or in Google. Or, if your boss decides they don’t want to go this direction anymore.
What’s the best approach to get buy-in from leadership once the year starts?
Like we said, the threat of competitors “eating your lunch” definitely has weight to it. But usually data and communication are the best approaches. If you know that campaigns are not working and you’re not going to achieve your goals, you need to have that early communication and prove that you need more budget. Show them graphs that show the trend and what you expect to happen down the road if things don’t change. Ultimately, tell the story with the data backing you up.
So, there you have it – the tips to hopefully make your next budgeting process much smoother. Budgeting can be tricky, but we hope these tips will help you optimize your planning process for the next year and beyond.