I teach this very simple formula to my students when they are required to write a pre-campaign report for the Google Online Marketing Challenge (GOMC).
You want to report metrics in a table like this:
budget ctr cpc clicks impressions
250 0,05 0,2 1250 25000
(The numbers are examples.)
To calculate estimates for a campaign plan, you only need to know three figures:
- budget
- goal CTR
- goal CPC
In the case of GOMC, the budget is set to $250. In other marketing cases, it is based on your marketing plan.
Goal CTR is what you want to accomplish with your ads. I usually say a CTR of 5% is a good target. Based on bidding strategy and competition, however, it can range between 3 and 10%. Less than 3% is not desirable, as it indicates poor relevance between keywords and ads.
Goal CPC is what you want to pay for clicks. Ideally, you want the CTR to be as high as possible and CPC as low as possible to maximize traffic (website visitors). The actual figure will be based on competition as well as your quality score (to which CTR contributes, among other factors of relevance).
Quality score can be enabled by customizing columns in keyword view; the bid estimates for your keywords can be retrieved via Keyword planner, as well as by looking at bid estimates (first-page and top-of-page) in the keyword view. In Finland, I usually say €0.2 is a good target for average CPC. In other markets, the CPC tends to be higher.
Out of the previous figures, you can calculate other metrics:
- clicks = budget / cpc
- impressions = clicks / ctr
The calculation assumes full usage of budget, which is not always possible when organic search volumes limit the growth (this is just a general limitation of search advertising).