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How to set up your advertising campaign budget

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How much should an advertising campaign budget be? There is no single answer as the cost of advertising is affected by several factors such as brand awareness, product quality and price, competition in the niche and so on. However, one thing is for sure — to earn, you need to spend. And, to help you wisely plan such a campaign, we’ve prepared step-by-step instructions for setting advertising budgets.

Determine your budget

The first step is to decide how much you are ready to spend on your campaign. The advertising budget definition includes the following parts: setting goals, the maximum budget, timeframe, and advertising platforms. 

Set goals

When planning advertising, marketers usually seek to improve:

  • Traffic (clicks)
  • Reach
  • Registration numbers
  • Engagement
  • Sales

Increasing traffic is the first step that will gradually lead to organic sales. Improving reach will positively affect brand recognition and extend audience coverage. More sign-ups means more interested customers and increasing opportunities of email marketing campaigns. Higher engagement allows you to be in touch with your audience and target it better, while increasing sales brings more income and is the ultimate goal for any ad campaign.

Remember to set measurable goals, for instance, by identifying the number of applications, sales, and subscribers you want to get. Here are some examples of key performance indicators (KPIs) for an advertising campaign:

  • Sign-ups: “Get 30 new subscribers in a given month.”
  • Traffic: “Increase the number of clicks to the site by 2x by August 31.”
  • Engagement: “Increase the number of comments on posts by 15% and the number of likes and shares by 20% by September 1.”
  • Sales: “Get 20 applications for autumn tours to Prague within two months.”

The rest of the planning for your advertising campaign will largely depend on how clearly you’ve determined its goals.

Set a maximum amount

The next thing you need to know about how to plan your advertising budget is the amount of expenses you wish to spend. Experts offer two approaches to budget planning depending on how long you’ve been present in the market:

  1. Small businesses looking for advertising on a budget should allocate 12-20% of their revenue to ad campaigns to start off quick. 
  2. Established companies striving to maintain and grow should plan expenses in the range of 5-12% of their gross income. 

The next step is to wisely distribute the planned budget between the advertising campaigns for the entire period. If the budget allows you to plan immediately for a year, then divide the amount monthly or quarterly, taking into account seasonal demand. If you are limited in budgets, then it is better to determine them for each advertising campaign and then distribute the spending by day and specific adsets inside the campaign.

When you understand which advertising campaigns work best, you can use the 70/20/10 advertising budget example to plan expenses: 

  • 70% of the budget goes to proven tools and platforms.
  • 20% of the budget goes to testing hypotheses in areas which you are sure enough of.
  • 10% of the budget goes to experiments and testing new ideas.

Set a time frame

If you wonder how to set a budget for advertising, you should decide on the duration of the campaign. The latter depends on many factors such as seasonal demand, established goals, etc. The most commonly used advertising schedules are:

  • Sequential: Once a week or once a month throughout the year.
  • Seasonal: During peak seasonal sales, for example, advertising about tours before the Christmas and New Year holidays.
  • Impulse: Advertising comes out periodically at regular intervals regardless of the time of year—it is a good option to rally around the demand.
  • Intensive: An active advertising campaign for 2-4 weeks, it is usually an average time for making a purchase decision. It is suitable when you need to sell a particular product.

Setting a timeframe will help you determine the budget and measure your campaign better, as well as plan the next campaign more efficiently.

Define channels

One of the factors influencing advertising budget allocation is channel selection. The best option is to use multiple channels so that they complement each other and help maximize your reach.

All online channels can be divided into several types:

  • Contextual advertising: Google Ads or Bing Ads
  • Social networks: YouTube, Facebook, Instagram, Pinterest, LinkedIn, Snapchat, Twitter, WhatsApp, Reddit (indicated by the degree of decrease in popularity)
  • SEO and on-site marketing
  • Email marketing

The choice of a platform depends on the purpose of advertising, the nature of the target audience, the amount of information that can be conveyed through this channel and so on. However, the main thing that you should take into account is the ratio of ads cost to the profit received. Advertising on some platforms may be more expensive, but the benefits will be higher.

Allocate budget wisely

When setting advertising budgets, it’s important to distribute it properly between different types of keywords. This affects not only successful promotion, but also how much Google advertising costs

There are five categories of keywords:

  • Research (top-of-funnel). These are general keywords that the user types in at the very beginning of their search, for example, “how to travel to Malta.” While being costly and competitive, such keywords won’t help you generate sales immediately but will only increase brand awareness. 
  • Branded keywords bring customers who are already interested in your business. While your website should be the first in search results for customers who types in your business name, this isn’t always true. Other brands can also bid on your name to show up first in the SERP, so allocating some budget to branded keywords is a must.
  • Competitor keywords will bring you hot leads if you choose competitors wisely. They should match your business in terms of product price, volume of offer, target audience, and so on.
  • High-intent keywords indicate that customers did their research and are ready to make a purchase, for example, “buy a tour,” “book tickets to Amsterdam,” “free shipping,” etc. While being costly, such keywords are the fastest way to increase sales.
  • Top-performing keywords allow you to maximize your campaign efficiency. After running advertising for about a month, try to find  keywords that have shown the best performance and make sure to continue bidding on them in other campaigns as well.

While the last two groups are usually more efficient, it’s still important to allocate some budget to other categories as well. Thus, you’ll catch some of your competitors’ audience, won’t lose your loyal customers, and will  increase brand awareness.

Track your campaign

After launching your campaign, it is necessary to monitor the KPIs all the time to adjust it in time. Make sure to check both settings and creative as well as types of advertising budgets. 

The most important factor of any advertising campaign is return on investment (ROI), which helps compare profits from your campaign to the ad spend and estimate the effectiveness of advertising investments. To calculate the ROI, subtract your overall costs from the campaign revenue and divide by overall costs.

The following indicators can also help track advertising results:

  • Directly from the advertising campaign—CTR (click-through rate), CPA (cost per action), and CPL (cost per lead)
  • According to the performance indicators of your site—the number of visitors who came through an advertisement and made a purchase.

You can track these indicators on the ad platform or through various web analytics services.

How to establish your ad budget wisely

Planning an advertising budget requires your engagement on every campaign level. This means that you should not only determine the amount that you are willing to spend on advertising, but also distribute it throughout the campaign, correctly set goals, find the right keywords, and choose the right platform to market on. Also, remember that the advertising budget is only part of all marketing spending, and you need to consider the costs of other promotion channels.