Key Formulas for Establishing a Paid Media Budget

In digital marketing, calculating a paid media budget requires precision, and knowing what to calculate and how to do it. Here's a quick guide to understanding the essential formulas that will allow you to optimise your investment.

🔍 Definitions to keep in mind:

📌 Average Order Value: Average amount a customer spends per transaction.

📌 Direct Costs: Costs directly linked to the production or delivery of the service/product.

📌 Lead Conversion Rate: Percentage of leads that convert into customers.

🧮 Essential Formulas

Target CPA:

Gross Profit per Order * Percentage of Profit Allocated to Paid Media.

CPL Target:

CPA Target * Lead Conversion Rate.

Monthly Budget:

CPA Target * Number of Customers Needed

ROAS for E-commerce:

Total Monthly Revenue / Monthly Budget

Use these metrics to set up and adjust your campaigns more effectively, based on actual performance and market conditions.

Remember: successful paid media management starts with a well-thought-out budget.

Performance Max Campaigns: Budget Considerations and Conversion Rates

If you can't budget for at least 10 clicks/day for your Performance Max (target leads) campaign, there is a considerable chance that it is not going to perform well.

The budget needs to be able to realistically achieve at least an average of 1 lead/day, and if you can't achieve at least 10 clicks/day on average, you are asking your Pmax lead campaign to perform at a conversion rate of over 10% (which is rarely the case unless we are talking about branded search). The average conversion rate on Google Ads in 2023 was 7%. *Source: Google Ads Benchmarks 2023 by Industry - Mega Digital

How Automatic Bid Optimisation Transforms Large Account Management in Google Ads

Do you manage many ad groups and ads in a Google Ads account? Bidding automation could be helpful to you.

Using this auto-apply recommendation to optimise bidding, whether you are using the "maximise conversions" or "maximise conversion value" strategy, allows the algorithms to adjust bids in real-time, optimising expenditure and improving ROI without constant manual intervention.

In an ideal world, you would have the time to analyse and adjust the bids when you deem most appropriate, based on data, but this is not always possible when managing a high volume of clients.

This technique frees up time that would otherwise be spent on manual adjustments. If you manage a high volume of clients, those who have many ads with quite technical or complex products and services, this automatic application can greatly simplify campaign management and give you better results.