Big companies have big budgets. However, those budgets are hotly contested by every part of the organization from finance to sales to marketing to human resources to customer service. This can create a very competitive atmosphere inside the organization and management has to be very careful to avoid a zero sum budgeting attitude. Trust me, I’ve seen it happen.
In the past few months I’ve worked with two particular companies that have had budget cutbacks come down from management. The reasoning behind the reductions was very well thought through, but the reaction of each company was interesting.
The budget cutbacks here set off a full on Hunger Games crisis. Every department started clamoring to save their budget at all cost. The events team couldn’t cut back because they’ve been committed to events for months and can’t back out. Sales can’t just fire people for a month or so and rehire them. It was full on war, but budget still needed to be cut. And PPC emerged as an easy target for short term budget cuts.
Fortunately the cuts here didn’t lead to Armageddon, but the final target was familiar. Headcount is too inflexible. Other marketing channels were prepaid. PPC took the bullet here as well.
Why Is PPC The Whipping Boy?
PPC ends up getting the short end of the stick for different reasons, but there are a couple of common denominators here.
• PPC is post pay – This means that PPC budgets haven’t been spent until the moment the click happens. This makes the budget highly vulnerable to short-term budget grabs.
• Nobody needs to be fired – Many departments have large portions of their budget locked up in headcount. PPC is highly leveraged and so you can adjust the budget a lot without having to fire someone (and it’s even easier if the managing agency is on % of spend because then you get another percentage break when you reduce the budget)
How To Protect Your Budget
The best defense is a properly educated management team that understands how PPC works, because drastic changes in the budget do have an impact on performance. Tests in paused campaigns can be invalidated. Competitors can become entrenched and develop better metrics while you’re sitting on the bench (Michael Vick vs. Kevin Kolb anyone?) Management needs to know the true cost of any budget cut so they can make a well informed decision. That said, there will probably be times when you need to prune down the spend quickly.
How To Strategically Cut Budget
I think this is pretty common sense for most PPC managers, but here are my recommendations for pruning back a budget quickly:
• Campaigns, Ad Groups & Keywords with high cost/conversion – As the most expensive conversions they eat up budget more quickly and you give up the least volume when cutting them. However, don’t kill your most profitable terms in the process. That would be cutting off your nose to spite your face.
• Exploratory efforts – Automatic placement display campaigns and really broad keywords come to mind. The key is to focus on core elements first and spread budget toward the periphery until it runs out.
Don’t let your PPC program turn into the whipping boy. Educate your management on how important the program is and the cost of drastic changes in budget. Then, if you must, cut intelligently to maximize performance.
Robert Brady is the PPC expert at Trafficado, a company that provides PPC management, and conversion rate optimization services for SMBs. He is a Google AdWords Certified Partner and is certified with Marketing Experiments for Online Testing and Landing Page Optimization.
He currently resides in Provo, Utah and can often be found skiing the greatest snow on earth, mountain biking through the Wasatch mountains or playing ultimate Frisbee at the park on a Saturday morning. The best way to say hello is through Twitter, where you can find him @robert_brady You can also reach Robert on Google+