I am suprised by how often I still see how budget caps are used in PPC campaigns. Such a basic thing can make a real difference to performance and return.

Budget caps are there to prevent you from overspending as a safety precaution and are not a primary method that should be used to control spend. They are great as a fail safe measure but they are not a performance effective method of controlling spend and are often a sign of a lazy marketeer or someone who does not know what they are doing.

Budget caps are great for those new to PPC but experts should know better and be able to control spend by cost per click (CPC) using caps merely as a back up precaution.

Simply put, if your campaigns are hitting their budgets daily you are not getting the most out of your paid search campaign.

Why?

Not only will your ads go offline meaning you will miss out on conversion when you reach your caps but by not reducing average CPC you are missing out on receiving more clicks for your spend, heightening the chance of additional conversion. If conversion rate (and avg basket value) remain equal you will get more clicks, more sales, a reduction in CPA and an increase in ROI. Nice.

There is a valid argument in some industries that very high rank is key to conversion and that lowering average CPC and hence ad rank, conversion rate will fall aswell. This is more in those industries or products that are heavy on the trust factor, like finance, loans, insurance and sometimes travel. So test conversion against your rank & evaluate whats best for you. If you are convinced you cannot reduce rank on key terms (or increase your caps), reduce costs elsewhere and increase ad delivery by optimising account structure, keyword lists and ads.

More often that not you will find that you will get less window shoppers and higher conversion in lower positions than the top 3 and a lower average CPC to boot all equating to a better return on ad spend.

So go check your caps