How to set B2B online ad goals & budgets

Is Your Google Ads Budget Enough to Prove a Significant Test?

Insights from a past B2B Client Discussion

Recently, I had a call with a B2B client who wanted to test the ROI of Google Ads with an initial £2,000 budget. They had previous reservations due to past experiences.

In summary, I advised the client that while £2,000 can provide some good initial data on cost per click (CPC), it’s typically insufficient to accurately gauge lead generation success.

Below is my rationale behind this summary:

B2B Client Data Shared with Me:

100% of leads come from 5 X Business Development Managers (BDMs), who use cold calling to book meetings.
60 sales qualified leads (SQL) a month
£17,000 cost for the 5 X BDMs
£283 cost per SQL
33% conversion rate SQL > new customer
20 new customers a month
£850 cost per new customer
The lead-to-customer conversion cycle is one month

1. Target Result:

For Google Ads to be viable as a lead generation channel, it must match or better the results of the BDMs – £283 cost per SQL and £850 cost per new customer. Let’s aim for Google Ads to achieve a £200 cost per SQL and a £700 cost per new customer.

2. Client’s Preferred Ad Budget:

Theoretical estimates based on the £200 target SQL suggest that the client’s £2,000 spend might yield around 10 leads. The conversion of these leads to SQLs is yet to be determined.

3. Minimum Conversions:

For a Google Ads test to be beyond random probability and statistically significant, Google recommends that a campaign should have at least 50 conversions (in this example, leads) in the last 30 days. Based on a £200 cost per lead, this would mean the budget would need to be at least £10,000.

4. Minimum Test Time Period:

Considering statistical significance, if the lead-to-customer conversion cycle is one month, it would be prudent to run the campaign for at least two months. This allows for a larger sample size and one month to gain leads and another month to observe how many become SQLs and convert to new customers.

5. My Recommendation:

Month One: Set the ad spend budget to £2,000 to capture real CPCs and conversion rates, making necessary adjustments.
Month Two: Increase the budget to £4,000, which should yield the lead > SQL rate, plus a small chance that the initial c. 10 leads from month one show signs of becoming new customers.
Month Three: Propose an ad spend budget of £8,000, as we would have two months of data and potentially some new customer signups, indicating strong performance.

This structured approach, combined with diverse creative assets (30-second videos and images) and potentially using both Google and LinkedIn Ads with remarketing, provides a clearer picture of Google Ads’ potential for lead generation.
Starting with a £2,000 test budget is a reasonable step to gather initial insights. However, for a conclusive comparison with traditional methods like BDMs, a comprehensive budget and well-planned strategy are essential to ensure the test is statistically significant.

6. Other things to consider:

Clarify the Lead Definitions & CR Rates: It’s important to differentiate and measure between leads, sales qualified leads (SQLs), and the expected conversion rate for each stage within the Google Ads funnel.
Test Variability: The cost per SQL and cost per new customer can vary in Google Ads compared to traditional BDM methods due to market competition and keyword bidding.
ROI / LTV Calculation: The initial focus is on SQLs, but then it moves to customers, then to understand life time value (LTV), which can then all be factored into the budgeting equation.
Using Micro Conversions: Google’s recommendation of 50 conversions over a 30-day period – does not have to be leads and won’t initially be. We will use “micro conversions” as positive signals to feed the algorithm, like a click on the contact button or viewing the pricing page etc. But for the purposes of budgeting using leads provides an initial benchmark.

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