How Can You Tell If You’re Overspending?

Pay-per-click (PPC) advertising is a powerful tool for driving targeted traffic to your website and generating leads. However, overspending in PPC campaigns is a common challenge, leading to wasted budgets, reduced return on ad spend (ROAS), and inefficient marketing strategies. The key to a successful PPC campaign is ensuring that your budget is being utilised optimally to generate conversions at a cost-effective rate.

Overspending doesn’t just mean high costs; it means inefficient spending where the cost of acquiring a customer outweighs the revenue they generate. In this article, we will explore the key indicators of overspending and provide actionable strategies to optimise your PPC budget.

Signs That You Are Overspending

1. Inaccurate Conversion Tracking

One of the biggest reasons for wasted PPC spend is incorrect conversion tracking. If conversions aren’t being tracked properly, you may be allocating budgets to underperforming areas without realising it.

Common Conversion Tracking Issues:

• Double Counting Conversions: If a single user triggers multiple conversion actions, it inflates the numbers and misleads bid strategies.
• Conversion Values Not Set: The default value of $1 for conversions doesn’t provide meaningful insights. Not assigning real values can lead to ineffective budget allocation.
• Too Many/Few Primary Conversions: Having too many primary conversions skews bidding strategies, while too few can under-represent campaign performance.

Solution:

• Go to the Goals section in Google Ads and verify conversion actions.
• Assign appropriate values to conversions based on their business impact.
• Regularly audit conversion tracking settings to avoid duplicate or irrelevant conversions.

2. High Cost-Per-Click (CPC) Compared to Industry Standards

While a high CPC isn’t always a problem, if your cost per click is consistently higher than your competitors, it could be a sign of inefficiency in your bidding strategy.

Possible Causes of High CPC:

• Entering Unintended Auctions: Broad match keywords and dynamic search ads can pull you into expensive and irrelevant auctions.
• Regional Price Variations: Certain locations may have higher competition, driving up CPCs.
• Increased Competition: A new competitor aggressively bidding in your niche can raise overall CPC rates.

Solution:

• Use the Insights tab in Google Ads to analyse when and where your ads are serving.
• Adjust location targeting to focus on profitable regions.
• Evaluate Auction Insights to monitor competitor activity and adjust bids accordingly.

3. Lack of Proper Exclusions

One of the most common overspending mistakes is failing to use exclusions to refine targeting. This results in your ads being shown to irrelevant audiences, leading to wasted clicks and poor ROAS.

Types of Exclusions:

• Negative Keywords: Prevent ads from appearing in irrelevant search queries.
• Placement Exclusions: Remove low-quality or irrelevant websites from the display network.
• Audience Exclusions: Exclude existing customers or low-intent users from seeing your ads.

Solution:

• Regularly update negative keyword lists.
• Audit placement reports and exclude irrelevant websites.
• Use first-party audience data to refine targeting and exclude non-ideal customers.

4. Unrealistic Budget Allocation

A budget that does not align with campaign goals can lead to overspending in areas that do not deliver high ROI. If your campaign is spreading its budget across too many segments, the spend might not be optimised.

Common Budgeting Mistakes:

• Allocating equal budgets across different services/products with varying margins.
• Running too many campaigns without prioritisation.
• Overspending on generic keywords with high volume but low conversion intent.

Solution:

• Segment campaigns by product profitability and business objectives.
• Focus budget on high-performing campaigns while testing new ones with a smaller budget.
• Use bid adjustments to allocate higher spending to proven converting audiences.

How to Audit and Optimise Your PPC Spending

To prevent overspending and ensure efficiency, conducting regular audits is essential. Here is a structured approach to auditing your PPC campaigns:

Step 1: Review Conversion Data

• Verify if conversion tracking is correctly implemented.
• Ensure that conversion actions align with actual business goals.
• Check if high-cost campaigns are driving valuable conversions or just vanity metrics.

Step 2: Evaluate CPC Trends

• Compare your CPC with industry benchmarks.
• Identify high-CPC locations and adjust bids accordingly.
• Analyse keyword match types to ensure they are not triggering expensive, irrelevant searches.

Step 3: Analyse Auction Insights

• Monitor competitor activity and adjust bids based on competition levels.
• Use bid strategies like target ROAS or maximise conversions if aggressive bidding is driving up costs.

Step 4: Review Negative Keywords and Exclusions

• Ensure you are filtering out irrelevant search queries.
• Use placement and audience exclusions to refine targeting.

Step 5: Adjust Budget Allocation

• Redistribute budget to the highest-performing campaigns.
• Avoid overextending your budget across too many campaigns without proper segmentation.

Step 6: Monitor Performance Regularly

• Conduct weekly audits for bid adjustments and CPC fluctuations.
• Perform quarterly deep audits to realign budget strategy and performance goals.

Best Practices to Prevent Overspending

1. Leverage Automated Bidding Wisely

• Use Target CPA and Target ROAS to control spending.
• Avoid fully automated strategies without regular performance reviews.

2. Use Geo-Targeting to Optimise Budget Allocation

• Identify high-converting regions and increase bids there.
• Reduce spending in areas with poor conversion rates.

3. Improve Ad Quality Score

• High-quality ads with relevant keywords can lower CPCs.
• Regularly optimise ad copy and landing pages to improve Quality Score.

4. Refine Keyword Targeting

• Use Exact Match and Phrase Match keywords to avoid broad-match inefficiencies.
• Continuously optimise negative keywords to prevent wasteful spending.

5. Test and Iterate

• Run A/B tests on different ad creatives and landing pages.
• Optimise campaigns based on performance data, not assumptions.

Conclusion

Overspending in PPC campaigns can drain your marketing budget and reduce profitability. However, by consistently auditing conversion tracking, CPC trends, exclusions, budget allocations, and ad performance, you can optimise your ad spend and maximise ROI.

A proactive approach, combined with strategic adjustments, will ensure that your PPC campaigns operate at peak efficiency. Regular audits and performance tracking will help you stay ahead of competition and make the most of every dollar spent in advertising.

By implementing the strategies outlined in this guide, you can prevent overspending, improve your ROAS, and ensure your PPC campaigns deliver maximum value to your business.