Learn more about the relationship between budgets, conversions, and cost per acquisition. 

Budgets can be tough to manage, especially in new campaigns. However, setting the budget too high or low can lead to wasted spending; this is why it is essential to manage your budget before starting. 

That’s why we will spend the time addressing the relationship between budgets, conversions, and cost per acquisition. 

Basic Rules Of Engagement

It’s important to remember that every budget is different for each client; this can change weekly, monthly or yearly. 

If you set a daily budget, the ad network will average your daily spend across 30.4 days. This can mean the ad network will spend up to 200% of your daily budget on a given day.

Monthly budgets may allow for more fluctuation on daily spending, and for the most part, will honour the stated number.

They’re great for those who need to spend a certain amount in the given time scale and can be a handy way to get around the ramp-up period for new campaigns.

Your cost per acquisition (CPA) is determined by the conversions you designate as “in-conversions”.

This number can be spiked by having too many conversion actions or not enough.

Secondary conversion actions won’t be counted into the reported CPA or smart bidding. 

Budget’s Impact On Conversions and CPA

The volume of clicks determines your actual costs. 

CPA and conversion rate tells you:

• Are you configured for quality or volume traffic?
• Can your budget support all the objectives?
• Is your sales team/site doing at closing the deal?

The best way to see if you have enough budget is to look at impression share lost to budget.

The CPA will go up if the budget is too low to support enough clicks to the site to trigger the conversion rate.

Increasing your budget doesn’t always lead to a decrease in CPA if the quality of the traffic is poor.

Any adjustments to the budget are based on scaling for conversion volume as opposed to troubleshooting intent.

Starting with a slightly higher budget within the first 60 days of a campaign can help you get statistical significance on the traffic quality. 

When To Change The Budget Vs. When To Change The Channel

It’s important to know when the marketing channel is a good or bad fit for a budget as the competitiveness marketplace differ.

Bringing a lower budget to paid search might result in higher CPAs due to the higher costs per click.

Bringing a large budget to an awareness campaign might also have higher CPAs due to the lack of transactional focus.

Signs the problem is not enough budget:

• Average CPC exceeds 10% of the daily budget.
• The campaign struggles to spend the budget consistently 
• Top of page impression share is consistently below 40%.

Signs the issue is the channel:

• Lead quality is poor or random.
• Increasing the budget did nothing to help the CPA situation.

Takeaway

Your budget will not guarantee a set number of conversions or CPA. However, it helps your ad campaigns to deliver your impressions and clicks.

Changing budgets should only be done if the campaign can’t support the objectives it’s been given.

I would recommend using ad network budget reports, which will help you forecast what your budget can deliver.

Are you ready to smash it online?

Euphoric is a digital marketing agency based in West Sussex, with a proven track record in delivering sustainable results through PPC.

If you want to find out how we can help you with your paid search campaigns and strategies, we would love to learn about your next project.