How Much Should I Spend on Google Ads? Determining Your PPC Budget
“How much should I spend on PPC?”
It’s a question we hear a lot, especially when we’re welcoming a new multifamily client who is just testing the waters of paid search campaigns for the first time.
Here’s the great news: It’s not that hard to get to a solid answer – one based on your real needs, not just a number pulled out of thin air.
I sat down with Aric Billings, a Senior Digital Marketing Specialist here at 30 Lines, to go through our approach for helping you hit your leasing goals with the most efficient ad budget possible.
You know the numbers you have to hit. You should always start there, then work backward to determine your spend. This is true whether you’re handling online ads in-house or working with a PPC vendor.
And it’s a more straightforward formula to master than you might think.
You’ll need the following data before you start:
- Your leasing box score
- Whatever report shows you where your leads are coming from (all lead types: email, phone calls, chat, etc.)
- Your Google Analytics reports
- The traffic/budget estimating and planning tools in your Google Ads account
Now that you have that insight, it’s time for some marketing math. I promise you don’t have to be a mathematician to back into these numbers.
Please note: This example is for a typical stabilized property. We have some different techniques for new lease-ups and student properties.
Steps to Determine Your Ad Spend
This may seem oversimplified at first, but it’s a good exercise to prevent you from overspending or underspending. It’s also a useful practice when making thoughtful adjustments to ongoing ad spend.
Let’s dig in. Here are the steps to take to identify your online ad budget:
1. How many apartments do you need to rent this month? [Let’s say it’s 10 leases]
2. What’s your leasing team’s closing ratio? Divide the apartments you need to rent by this number. This roughly indicates the number of tours you need to give in order to get your 10 leases. [10 leases / 40% closing ratio = 25 tours needed]
3. What’s your lead-to-tour ratio? Across all your ad channels, this might be 25-30%. Divide again. This is the number of solid leads you need to give your leasing team enough at-bats. [25 tours / 30% lead-to-tour conversion rate = 84 leads needed]
4. What are your other ad channels delivering for you? Do you know you’re good for 30-40 solid leads every month from Craigslist, Facebook Marketplace, or an ILS? For our example, let’s assume we can get 35% of the leads we need from other channels, and our website carries the rest of the load. [84 total qualified leads needed X 65% of our leads need to come from the website = 55 website leads]
5. What’s your website’s session-to-lead ratio? On your website and landing pages, this might be your “leads from property website” (sometimes called your goal conversion rate). Industry averages are around 1%; we typically want that number to be 3-5% (or more) after we’ve optimized a website to increase conversions. Divide once more. This is how much traffic you’ll want to drive to the website to get the leads you need. [55 website leads / 3% session to lead conversion rate = 1,834 visitors to your site]
6. Look at how much traffic you’re already getting versus what you now know you need. Let’s say your website already gets 1,500 new prospect sessions per month. So, you’ll need to bridge the gap of about 334 sessions where you’re falling short.
7. Find the cost to acquire that traffic. In PPC, that’s your Cost Per Click (CPC). It’s going to vary widely by submarket and even by keyword. (You can look at your historical costs, or you/your vendor can pull estimates from Google Ads and a few other tools.) Multiply. Let’s conservatively assume it’s $2 for our example. (As of July 2019, the average cost per click across our 30 Lines portfolio of customers nationally is $1.01.) [334 website visits (clicks) needed X $2 per click = $668]
If you’re working with an agency or PPC vendor, don’t forget to add in their margin or management fee to get to your real total cost. If it’s 20%, you’re up to $802.
In this example, that’s your starting point for your monthly spend on paid search ads.
That’s probably not going to be the exact number you spend, but now you have a rough estimate of what your PPC budget should look like, based on your real projected vacancy. Adjust every month, or more frequently as you need to.
Improve Every Step
Now that you have that number, work toward optimizing every step of the process – starting from step 1. (Watch what happens… I think you’re going to like this.)
Can you increase your closing ratio from 40 to 44% with smarter lead nurturing campaigns or better sales training? If nothing else changes in the equation, your estimated budget falls to around $330 (and that includes the agency fee).
Improving your leasing performance by just 10% can cut your PPC spend by more than half.
The numbers get better as you improve each step:
Want more people to show up for their tours?
Try an online appointment scheduler or email/text scheduling assistant. That way, more people show up when you send them an automatic reminder with directions to your door.
Want your website to convert more visitors to leads for your leasing team?
Make sure you have updated pricing and availability that is easy to navigate, then layer on smart tools that increase conversions – targeted website pop-ups, keyword-focused landing pages, better images and multimedia, triggers and messaging inspired by sales psychology, live chat or a chatbot, etc.
Can you squeeze more and better leads out of other channels like organic SEO, Facebook Marketplace, or Instagram?
Go where the attention is. The more you can leverage your organic marketing channels, the less you’ll need to rely on paid sources to bridge that gap in traffic.
Can you improve the performance of your ads?
Look at your keywords that are converting, your ad copy, the user experience of your landing pages, and your overall quality score. Improving the performance of your ads can both increase your total lead conversions and reduce your costs per lead.
Do you need help backing into your online ad budget, or would you like to brainstorm ways to convert more of the traffic you’re already getting? Connect with us anytime. That’s what we’re here for.
Get Your Personalized Ad Budget
Every day, we help our customers hit their leasing goals by creating more efficient ad budgets. And we’re happy to help you, too.
Receive your free personalized PPC budget from 30 Lines.