Is there a relationship between low PPC daily budgets and low conversion rates? There most definitely is, but as opposed to what you might initially think, this is not a conspiracy on the part of the search engines, it is actually faulty logic from you, the advertiser. Erring in the side of caution by having extremely low PPC daily budgets will probably yield few if any conversions. What you actually need to do is increase your daily budget. Not sure how to adjust your daily budgets? Here is a video tutorial straight from Google:

Please note Google AdWords interface may have changed significantly since this video was made.

Generate Conversions

Unless your site is brand new, you already have a good idea of what your conversion rate is. If so, you also know how many visitors need to visit your site before it yields a conversion. As such, your PPC campaign should be designed to bring enough visitors to your site to yield at least one conversion per day. If your PPC daily budget is set too low, the number of visitors to your site will never reach the critical mass necessary to yield a conversion.

Let’s look at the math for a typical e-commerce website:

Conversion rate = 2%

Cost per Click = $1.00

Number of visitors necessary for 1 conversion = 50

Campaign Quality Score = 5

Daily Budget = $10.00

This site will get ten daily visitors before the PPC daily budget runs out. Ten visitors per day will yield very few if any conversions. The minimum budget to get this site converting is $50 per day. Although increasing the budget fivefold is an acceptable strategy, it is still not the best solution.

An Aggressive PPC Daily Budget Strategy

The best solution is actually to increase your PPC daily budget so that it yields three or four conversions per day. It sounds like an outrageous solution but it actually pays for itself:

More data becomes available for data mining which can be used to develop new keywords and negative keywords.

Quality Score improvement (this has several benefits).

More conversions per day.

Data mining will yield new keywords as well as negative keywords which overall should improve your campaign relevancy, resulting in higher CTRs which will improve your Quality Score. That means lower CPCs while actually getting higher ad placements, a win/win. The savings in Cost per Click alone could make a huge difference to your PPC campaign.

Lowering Keyword Bids

If you simply cannot afford a larger budget then your best bet is to lower your keyword bids. Your ads may wind up showing at a lower SERP position, but it is still a better option than having only ten visitors per day.

Remember, keyword bid prices can vary substantially within the first six positions, so it may be possible to lower your bid from $1.00 down to $0.30 while still winding up on the first page of results. If so, you could triple your visitor volume without sacrificing daily budget. Bid experimentation should yield the best bids for your situation.

Conclusion

Unless the purpose of your PPC campaign is brand awareness, you are undoubtedly looking to increase your conversions. To do so, you need to set larger daily budgets to give yourself a better chance to convert at least once per day. A very conservative budget will actually backfire by yielding few or no conversions, resulting in a very poor Return On Investment.