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How Much Should We Spend on SEM?

The question, “how much should I spend on Search Engine Marketing (SEM)?” is a good question and something all advertisers should ask. Notice this approach is a little different than saying, “I only have $5,000 to spend on SEM.” As an SEM Agency, we understand this backward approach to SEM is a little different than other digital mediums. For instance, you could spend an unlimited amount of advertising dollars to brand your business on programmatic advertising solutions or social media advertising; however, there are only so many converting keywords and searches in a market which caps your potential spend. Depending on the size of your business this may or may not be a big deal. In addition, to get the return on investment (ROI) you want, you also must take into consideration your search placement. Data-driven SEM Agencies, are positioned the best to maximize your SEM budget based on the highest converting factors such as keywords, geo-targeting, and more because they are leveraging the data.

Setting Your SEM Budget

Any SEM Agency should be able to help you set an ideal budget by using the Google Keyword Planner and/or Bing Keyword Planner. If your target budget comes in much higher than you’re expecting, you should ask for details like, How are they arriving at the budget? What keywords are they are using? What are their Cost Per Click (CPC) expectations? Most importantly, what is their management fee and what do they do with the budget if they don’t spend it?

The reason you should ask these questions is due to the concept of diminishing returns and potentially fraud. Let me clarify. Certain keywords will convert and provide value at a higher percentage than others. In fact, some keywords that seem ideal don’t convert at all. If you have some of this data beforehand, take out the junk keywords upfront. Or maybe you can eliminate products and/or services to better target your most profitable products/services.

SEM Management Fees

Clarify your SEM partner’s management fee and budget policies. You’d hate to see a 50% management fee when you can easily find someone who might perform equally or better for around 15%-25%. Actuate Media is a little different, we do a flat fee, which is typically even less. Also, you should be skeptical if they promise higher returns for the higher management fee. Professionally speaking, our team typically outperforms just about any media company. We have less overhead, so we don’t need to charge as much. Finally, you should also ask if they keep the remaining budget if the campaign underspends? If so, what is their incentive to spend your budget and maximize your ROI? They could simply be telling you to spend more than necessary to keep it.

SEM Keyword Strategy

Are they using Broad Match, Broad Match Modifiers, Phrase Match, or Exact Match? Why is this important? Certain strategies require more attention to optimize or may result in keywords that are too broad. Let’s look at the keyword “plumber,” if they are using a broad strategy then your ads will show for: plumber videos, plumber tools, plumber supply, plumber putty, etc. What a waste right? This means you might be spending some serious budget on terms that will not convert. We are not saying don’t use broad match, but if you do add the obvious negative keywords in before the campaign begins or at least understand if/when your vendor will do this and for a report.

SEM Conversion Optimizations

First, you need to make sure you’re measuring everything you want to analyze like form fills, phone calls, e-commerce transactions, and more. Once this is complete, you need to make sure the conversions are imported or set in Google AdWords. Then your SEM partner should be able to quickly locate which cities, keywords, and/or ad groups are performing within the first month or so. If you’re spending a bunch of money on clicks that are not converting something needs to change like the landing page or the text ads. If that still doesn’t improve results, then pause keywords/ad groups and stop wasting money. If necessary, the budget might be better appropriated to higher converting campaigns. In the end, how your partner sets up your account is important for data analysis, something we can discuss in another blog post.

If you have any questions about SEM, setting budgets, or data analysis, we encourage you to ask below or contact us directly.

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