Maximum CPCs: How High Should You Bid?

Pay-per-click (PPC) is a highly competitive advertising platform. With more and more companies signing up for PPC campaigns every day, advertisers have to bid higher””not only be within the top three positions of the sponsored listings, but to be on the first page of results. Though bid position is not solely based on the maximum amount of money you are willing to spend per click (also known as maximum cost-per-click, or CPC), it is one of the key components. The conundrum: how much you are willing to bid for your ads to show up as close to the top of the listings as possible?

Your budget plays a huge role in how much you are willing to bid, but other factors come into play as well. Among these are the importance of each targeted keyword to your campaign, the way the ad copy is written, and the landing page of each ad. Here’s a look at each of these factors in greater detail:

Stretch Your Keywords and Your Budget: How much money you have for the campaign ultimately determines how much you can bid per keyword. If it takes a bid of $15 for your ad to show up within the top three positions and your monthly budget is only $200, you have a problem. Unfortunately, the advertisers with the most money are going to pay top dollar to get the first listings for their most popular keywords. However, the more terms you have in your keyword, the less expensive it is generally going to be. For example, the term “baseball bats” might cost $10 to be within the top three positions, but the term “wooden baseball bats” might only cost $6 because it is less competitive. Shorter terms might bring more clicks, but longer, more tailored terms will bring better qualified traffic.

Use Strategic Keywords: Campaigns can have thousands of keywords, but not all hold equal weight. To determine which keywords you should bid on, you must assess your business objectives. For example: you own a sports shop and your top-selling product, baseball gloves, account for 75% of your revenue. The other 25% of your revenue comes from baseballs and baseball bats. Knowing these metrics allows you to put more of your budget toward your most lucrative products, in this case being the baseball gloves. So for “baseball glove” related terms, you bid to be within the top three positions, but for other terms, you make competitive bids but are not as concerned if they show up lower in the rankings.

Write Effective Ad Copy: Being within the top three positions of the sponsored links is good, but ultimately meaningless if your ad does not have the targeted user search query and a strong call to action. Every ad should mention the targeted keyword at least twice within the message: once within the headline and once within the description. Every ad should also include a call to action. What do you want the user to do once he/she gets to your destination page? This action should be clearly spelled out. Using the example “wooden baseball bats” as the search query, here is an ad that just uses the generic “baseball bats” keyword and does not have a call to action:

Ineffective Text Ad

This ad, however, specifically targets “wooden baseball bats” and has a defined call to action:

Effective Text Ad

The second ad is much more likely to be clicked because the user sees his/her search query and there is a clear call to action.

Tailor Your Landing Page: Not to be forgotten is the landing page that you are sending the user to once the ad is clicked. An ideal landing page should contain the targeted keyword and be a continuation of the ad. Using “wooden baseball bats” again, the call to action for this ad is to “browse the selection”. The landing page should allow the user to browse the selection of wooden baseball bats that the company offers. If the landing page does not immediately allow the user to take this course of action, it will most likely lead to a bounce, meaning the user will leave the site. Clearly getting that user to just click on your ad is not enough if your goal is to generate leads.

In the end, you must diagnose these four factors before determining your keyword bids. It is beneficial to show up near the top of the sponsored listings, but if you do not have clear conversion funnels and goals established for your ad, you are ultimately wasting your money.

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2 Responses to Maximum CPCs: How High Should You Bid?

  1. Some great tips Matt,

    Especially agree with your first point – ensuring you make the most of your budget. Despite it being such a simple thing to rectify (keep reducing bids until your daily budget is not being hit), I still see case after case of campaigns regularly hitting their daily budgets. Wrote about it recently on my blog:

    http://www.alanmitchell.com.au/techniques/budget-time-for-budget-checks/

    Also agree that effective ad copy is extremely important; most notably because it’s the only part of the PPC management process that the user can actually see. Ad text plays such an important role in Quality Score, CTR, pre-qualification and user engagement, so it’s essential to take the time to get it right.

    Cheers,
    Alan

  2. Alan,

    I agree with your assessment concerning effective ad copy. Aside from setting up tightly themed ad groups, each piece of ad copy must have the targeted keywords present. Theoretically you should never see an ad that does not have at least one word in bold text.

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