It might sound obvious, but the Cost-Per-Click (CPC) paid for any given keyword plays a huge role in determining the success of your pay-per-click campaign. Say you have just $200 per month to spend. Getting keywords at an average CPC of $0.20 is ten times more effective than if you had to pay $2.00 per click for the same keyword. (If you haven’t already, be sure to read “Pay-Per-Click Basics” to see how your quality score affects your CPC.)

So, where to start? This article assumes you’ve created an Ad Group and decided on certain keywords. Once logged into your AdWords account, access the particular Ad Group. Click on the “Keywords” tab at the top of the panel and then click “Edit Keywords”. You’ll see an “Estimate Search Traffic” button at the bottom of the screen. This is a great tool for forecasting the traffic you are likely to receive based on the amounts you’ve bid for various keywords.

So how to manage your monthly pay-per-click budget?
Really, it’s just a matter of what your can comfortably afford to put at risk. When it doubt, error toward the conservative. What you’re really trying to do at this point is test the effectiveness of your content, or sales pitch. The greater conversion rate, the more relevant your content, the lower your cost-per-click (CPC).

Here’s an example of how the math might look:
We’ll start with the following assumptions: 1) You’re selling a product that generates $30 revenue per sale, 2)  You make 1 sale out of every 50 clicks (a 2% conversion rate) and 3) Your cost-per-click is $0.45. In this example, your total spent was $22.50 (i.e., 50 clicks x $0.45). You made $30 in revenue, and so you profited $7.50.  Not bad. At this point, you’ve seen that you can make a profit. Maybe not as much as you’d like, maybe not as much as you’re capable of, but a profit nonetheless. Things to consider at this point would be tweaking your content to make it even more effective, and then scaling up your monthly pay-per-click budget.

But what it you lost money on the campaign? In this case, you need to do one or more of the following: 1) Raise your quality score to reduce your CPC and/or 2) Adjust your product pricing.