Budgeting for SEM Success
Introducing this approach for direct response campaigns has some inherent risk where the marketer might lose precious volume from a low projection or blow through a budget with a high projection while missing an opportunity that's larger than the forecast. However, in many cases it makes sense to cap a budget based upon forecasts.
High-volume verticals, exceptionally long sales cycles, nebulous goals and shoestring budgets need to be taken into account in order to properly set a budget to prevent unsustainable expenditures. Shoestring budgets demand a forecasted approach with a growth plan, and long sales cycles can create a delay in returns that can cripple a business if spending isn't capped. Many traditional marketers prefer a fixed approach to allow for predictable expenditures and long-term budgeting stability. While a fixed budget does promote focused and accurate projections — as well as encourages honing in on the best keywords — it will inevitably result in inefficiencies because a set budget becomes either a goal or constraint. It's rarely optimal.
Test-Driving a Hybrid
While no approach is best suited for every type of campaign, finding a middle road can suit the needs of all parties involved. A "hybrid" tactic involves setting a budget target with some flex that's able to adjust to real-time changes in conditions. In practice, most companies and marketers set their search budgets using this approach. Aligning the incentives of agencies and clients can be achieved through flexible spending targets blended with performance goals.
Constantly reviewing budget levels in the face of an ever-changing market can help lend the necessary flexibility while still providing somewhat predictable budgeting. A hybrid budgeting model does lack some of the freedom of the blank check, but it doesn't constrain an agency from taking some measured chances on newly presented opportunities. It also lets marketers sleep well at night knowing what they'll be spending.