00:04Now that we have learned how to choose the campaign objective that is aligned with your
00:08business goals, let's talk about budgets.
00:11By the end of this video, you will know how to determine the right budget for your aid
00:16campaign.
00:17Your campaign budget is the total amount you plan to spend over the course of your aid
00:21campaigns.
00:22Sometimes, you might run an aid campaign for a long period of time.
00:26And then it's usually easier to express your campaign budget as the amount you plan
00:31to spend per day or per month the campaign is live.
00:35In some cases, your campaign budget might already be decided by another party.
00:40For example, if you work in a marketing team in a company that allocate a certain monthly
00:45amount to social media in campaigns, well that will determine your overall campaign budget
00:51if you want a different campaign in a given month.
00:54You would break down that budget into a budget per individual campaign.
00:59Or if you work for an agency, your client might budget a certain amount per money for the campaign
01:05you are managing.
01:07In that case, it's your job to get as many results as possible while not going over budget.
01:12And these results might be app download, item purchase or newsletter signups.
01:18Your client might also provide you with a limit on how much each result can cost.
01:23In other cases, you might determine the campaign budget yourself or you might be asked to recommend
01:29a campaign budget to a client.
01:31So, how much did you spend then?
01:34Well, your campaign budget ultimately will depend on what result you are aiming to achieve.
01:39And your realistic estimate of how well your aid will drive sales or convergence.
01:45And we will talk about how to determine each of those things in this video.
01:49Let's use an example company to walk through how to determine the campaign budget.
01:55We will start with an online bike parts retailer who is aiming to achieve the result of $50,000
02:00in revenue per month.
02:03Let's say you run this company.
02:05You know that for every 100 people that land on your website, one person becomes a buyer and
02:11buys $200 bike tires.
02:13This means every buyer generates $200 in revenue.
02:18You want to make $50,000 in revenue per month.
02:21That means you will need 250 buyers.
02:25To now calculate the number of website visitors you will need, multiply the 250 buyers with the
02:30number of visitors needed to get a buyer.
02:33250 buyers multiplied by 100 equal to 25,000.
02:37So, your heirs will need to get 25,000 website visitors per month to achieve your revenue goal.
02:44So, how much money can you spend on advertising to get those 25,000 website visitors?
02:51Well, to calculate that we need to compare revenue in our actual profits.
02:56Let's say the set of two bike tires that you are selling cost $80 to make and $20 to sell.
03:04This means that although your revenue is $200, your profit is $100.
03:10The car you are only making $100 per sale in profit.
03:14And this means that you don't want to spend more than $100 in advertising per month.
03:20When you spend more than your profit, then that means you lose money.
03:25So if you make $50,000 in revenue, you are going to make $25,000 in profit.
03:31And this means you should not spend more than $25,000 on advertising.
03:38Every dollar you spend less than those $25,000 is now your actual profit after reflecting your
03:44advertising cost.
03:45So it's good to remember to never spend more than advertising than the profit you make.
03:51Here is another general guideline that's good to know the rule of thirds.
03:56And many businesses use this rule to decide on how much to spend on aids to keep their business
04:02growing.
04:03This rule says to spend no more than one third of your expected revenue on advertising.
04:09If you want to see $50,000 in revenue, you should not spend more than one third of that
04:14profit, or about $16,600 on advertising.
04:19Now we need to calculate how much we can pay per website visitor.
04:23Well, you are going to need 25,000 website visitors to make $50,000 in revenue.
04:29You also know you don't want to spend more than about $16,600 on advertising.
04:35You may not be planning on spending all your advertising dollars on one platform though.
04:42But is spending $16,600 enough to get us 2,500 website visitors?
04:48Well, to configure that out, we need to test our aid campaign.
04:53So how do you test your campaign?
04:55Well, before you put in your full budget on day one, we recommend starting with a smaller
05:01test budget and monitoring your campaign very closely.
05:04Get an idea of how much impressions our clicks cost and how will they convert into results.
05:10And with that data in hand, you can then calculate how much you can spend on each your objectives.
05:17In the next video, we will have a look to how to set your campaign budget in Facebook
05:22Airs Manager.
05:23See you in the next review.
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