For a small number of people, approaching business with an unlimited advertising budget can be a smart strategy. Although this applies only to a (very) small minority of owners, it can be a wise plan of action in some scenarios.
This method undoubtedly involves spending more money, but the results can be extremely profitable when carried out correctly. Since this method isn’t for everyone, it’s crucial to understand when it’s appropriate. As well as when more traditional advertising strategies might be a better option.
This article will cover how to advertise with an unlimited budget. As well as the pros and cons to this bold approach.
When most dropshipping store owners get started with paid advertising, they begin by defining a daily budget. A daily budget of between $10-$30 is a common—and wise—starting point. As business grows, most dropshippers fine-tune their campaigns and increase their daily ad spend as their results continue to move their favor.
Oftentimes daily budgets can increase until they’re in the $200 per-day range. However, even when advertising is going well, there’s always a ceiling. This is what we call taking a budget-constrained advertising approach. You’ll never spend more than your set daily allowance on advertising campaigns.
The majority of ad campaigns are budget-constrained, and it works well in many cases. However, for some dropshippers, advertising with an unlimited budget can actually be a more profitable strategy.
Cons of a Budget-Constrained Approach
No matter what kind of budget you start out with, your ultimate goal in terms of advertising is actually to spend as much money as you can—as long as you’re still turning a profit. This might sound counterintuitive, but if putting money into ads is generating sales, then it’s a wise use of funds and you should capitalize on that momentum.
The main issue with a traditional, budget-constrained approach is that no matter how good of a day your business is having, you won’t get any new ads once you max out your budget. You’re essentially throttling yourself and your potential for profit by setting a concrete limit.
That being said, the first step you should take as you move towards advertising with an unlimited budget is to pivot to a ‘bid-constrained’ approach.
With a bid-constrained approach, rather than simply setting a daily budget, you provide a maximum that you’re willing to spend for a certain action. This can be:
The trick to making this approach feasible is to make the action that you’re paying for sales and to focus on the dollar amount of each sale. You need to consider how much people are actually spending as a result of viewing your ads.
For example, if you sell products for $1,000, you might set your bid-constrained advertising budget at $100. This means you’re willing to accept a 10x return on ad spend, or 1000%.
Once you have a number you’re willing to accept as the return on your investment, you can bid using these constraints. An example of this would be choosing ‘Target Return on Ad Spend’ (Target ROAS) as your bidding type when setting up your Google ads. If you set your target ROAS at 1000%, Google will keep spending money if your ads are hitting that metric.
Even if you choose this option, you’ll still have to enter your daily budget, and Google/Facebook will still stop spending once you reach your limit. This is where the concept of an unlimited budget comes into play.
If you’re taking a bid-constrained approach, you can set your daily limit extremely high. It is because you’re not going to use that money unless it’s profitable and you’re reaching your target return. On the flip side, if your store is having a bad day and you aren’t making money, that budget money won’t be spent.
To help you conceptualize this, look at this example:
In this case, even though you technically could spend up to $20,000, you won’t actually use that much money unless business is booming and you’re making a profit that justifies that kind of advertising budget.
Things to Consider
It’s extremely important to make sure you’re tracking every piece of data accurately since you will have significant sums of money on the line. This strategy is not for beginners, and only works well when Google/Facebook already has data on your store—and you’re willing to monitor your advertising strategy closely.
If you choose to try this strategy, it’s also usually wise to ease into an unlimited budget mindset. Try increasing your daily budget incrementally, so you can monitor and evaluate the impacts before you add more funds.
This can look like initially moving from a $200 budget to a $400, to an $800 budget, and so on. There’s no need to jump to a $20,000 budget all at once, and adopting a ‘slow and steady’ mindset is generally wise and effective.
Choosing an unlimited budget approach is an extremely advanced technique, but it can undoubtedly pay off in the long run when executed correctly. Many stores are able to significantly improve the outcomes of their paid advertising by implementing this method. Following the tips above can help you do the same for your business.
If you aren’t ready to take the plunge, traditional paid advertising strategies can still be extremely effective. If you’re new to the world of paid ads, don’t wait to get started. The sooner you begin figuring out how to make paid ads work for your business, the better!