How much should I spend on Adwords?

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I would spend millions and pay $100 per click if it brought me profitable business.

The simple answer is what ever you can afford as long as the cost per lead generates good profits.

Adwords should drive to your website for further exploration, inquiry or purchase of goods service (if you have ecommerce). This is how you measure it and justify our favourite acronym, ROI!

Therefore the answer to what cost is how much do I make? (That is to say you have to work backwards!)

For example…
I spend on general marketing per week (eg $2000)including print ads, signage, flyers, referral gifts, yellow pages, and radio campaigns at Christmas.I make on each sale on average (eg $100) with a profit margin of 20% (eg $20)
I get 1000 leads each week – store visits, website inquiries and phone calls
and convert these leads to 100 sales (10%).
My general marketing casino online cost per lead = $2000/1000 = $2
My general marketing  cost per sale = $2000/100 = $20

(You should also work out how many website visitors convert to a lead (inquiry). This will help you work out how many clicks you need from your Adwords campaigns)

So in this case I would spend what ever I can afford and make sure you get the leads you expect.
If you spend $500 per week on Adwords you will need over 250 leads that convert to more than 25 sales to do better than your other marketing efforts.

If is beats your current marketing spend more, if not trash it!

Dont forget to test and measure everything to improve your cost per lead! Including test on keywords and negatives, ads copy and offers, search and content networks, image ads, landing pages, inquiry forms, response rates to inquiries and even the media you use to respond (email/phone). Remember to capture emails so those who are not ready to buy now may later.

Dont fall into the small business trap of being short sighted!  Customers are not a single sale, they are people who are born with a genetic need to desire relationships…so build one and consider the customer lifetime value. For example, it may be worth a loss on the first sale or two if they are repeat customers (like pet food) who deliver ongoing profits and become easier to serve (not to forget the referral benefits).

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