March 17, 2025

In the fast-paced world of digital advertising, managing a marketing budget effectively is both an art and a science, especially when focusing on conversion-based bidding strategies for local campaigns. Whether you’re running ads on paid search platforms or through social media platforms, understanding why campaigns might overspend or underspend can significantly enhance your campaign’s effectiveness and ROI.

So, how do we determine the right balance between overspending and underspending?

Conversion-Based Bidding and Budget Dynamics

Conversion-based bidding strategies, like Target CPA (Cost Per Acquisition) or Target ROAS (Return on Ad Spend), aim to optimize your budget to achieve specific conversion goals. These strategies are actually a second layer to the Maximize Conversion bidding strategy, and highly reliant on historical data and algorithms that adjust bids in real-time to capture the most valuable conversions.

However, this automation can sometimes lead to overspending. Here’s why:

• Algorithmic Learning Period: When you start using a new bidding strategy or when there are significant changes in your campaign, there’s a learning period where the system might overspend to gather data. This is particularly true for local campaigns where search volume can fluctuate dramatically by location and time. The system might initially bid higher to test the waters, leading to temporary overspending until it calibrates to the optimal bid for your local market.
  
  
• High Competition: In areas with high competition for specific keywords, particularly during peak times or seasons, the algorithm might increase bids to secure ad placements, thus exceeding the daily budget. This is often seen in local markets where a few businesses are vying for the same audience.
  
  
• Search Volume Spikes: Local campaigns can be heavily influenced by local events or seasonal trends, causing unexpected spikes in search volume. Automated systems might not anticipate these spikes, leading to overspending as they attempt to capitalize on the increased traffic.
  
  

Conversely, underspending can occur due to:

• Low Search Volume: If your local campaign targets a niche market or an area with low population density, you might not spend your full budget due to insufficient search volume. The system might conserve your budget for days when there’s more traffic, but this can result in an overall underspend if the volume doesn’t pick up as expected.
  
  
• Overly Restrictive Bidding: If your bidding strategy is too conservative, especially in a manual CPC (Cost Per Click) setup, you might not capture enough impressions or clicks, leading to budget underspend. This is particularly risky in local campaigns where bid adjustments based on location or time might be necessary to maximize exposure.
  
  
• Poor Keyword Matching: If your keywords are too specific or not well-aligned with actual search queries in your locale, your ads might not show often enough, leading to underspend. This issue can be exacerbated by the lack of broad match types or the use of negative keywords that exclude too many potential searchers.
  
  

Strategies to Mitigate Overspending and Underspending

To manage these budget variances effectively:

• Monitor and Adjust: Regularly check campaign performance. Tools like Google Ads’ Impression Share lost to Budget can inform you if you’re missing out on opportunities due to budget constraints, necessitating adjustments.
  
  
• Careful Conversion Setup: Ensuring conversion actions are set up correctly will be very valuable. Accurate setup will allow you to estimate your budget more precisely, depending on what actions you want the campaign to optimize toward.
  
  
• Seasonal Adjustments: For local campaigns, understanding and anticipating seasonal trends can help you adjust your budget or bidding strategy proactively. This might mean increasing budgets during peak times or focusing on long-tail keywords during quieter periods to maintain spend.
  
  
• Testing and Learning: Use A/B testing for different bidding strategies or ad placements to understand what works best in your local market without committing your entire budget to one approach. This testing can reduce the risk of both over and underspending by providing data-driven insights.
  
  
• Automated Rules: Setting up automated rules for pausing campaigns or adjusting bids when certain conditions are met can help manage budget volatility. For instance, you might pause campaigns if they exceed a set daily spend or adjust bids if conversion rates drop below a threshold.
  
  

Effective budget management in media marketing, especially for local campaigns, requires a nuanced approach. Understanding the intricacies of conversion-based bidding, alongside the unique search volume patterns of your target locale, is crucial. By implementing strategic adjustments and leveraging the right tools, marketers can find that delicate balance, ensuring neither over nor underspending, but rather, making every dollar work towards achieving the campaign goals. Remember, the goal isn’t just to spend the budget but to spend it wisely for maximum impact.