Bidding within Your Pay Per Click Budget

When you assemble your pay per click (PPC) budget, work your numbers backward to set up a budget within your overall marketing plan. Think about how much you can afford to spend and whether you want to spend it all at once or spread it out over a month or year. Every PPC provider has a somewhat different format for estimating results on search terms based on your bid.

An example of Yahoo!’s traffic estimation appears on the Set Your Ad Group Bid page in the following illustration. Changing your bid or moving the slider on the graph adjusts the projections.

[Credit: Reproduced with permission of Yahoo! Inc. © 2011 Yahoo! Inc. YAHOO! and the YAHOO! lo
Credit: Reproduced with permission of Yahoo! Inc. © 2011 Yahoo! Inc. YAHOO! and the YAHOO! logo are registered trademarks of Yahoo! Inc.

You can easily break the bank on PPC ads, so try these tips to get the most benefit from your PPC spending, without getting sucked into the budget-busting barrel of overbidding:

  • Don’t bid to win the top position. In fact, TheNextweb shows that the top PPC ad might attract the highest number of tire kickers. Ads in the second position might draw more serious buyers.

  • Remember that Google incorporates quality score and CTR, as well as bid price, in determining ad placement. (This approach just happens to maximize the revenue that the search engines receive.) Bing/Yahoo! uses these criteria only to provide feedback on ad and keyword relevance.

  • Improve your natural search engine ranking. Why waste money advertising on sponsored searches if you achieve top results for free? Save your money or spend it elsewhere.

  • Set geographic limits. You obviously would limit the range of your ads if you depend on a local population to attend an event or make a purchase in your real-world store. Setting geographical limits can extend your budget, even when you sell nationwide. Look at your sales statistics to see where your past and most lucrative buyers live. Constrain your ads to run in those locations.

  • Use your traffic statistics to see which days of the week and times of day your buyers are active. Constrain your ads to run during those times.

  • If you're selling online or have a specific way to monitor viewer activity, set up conversion tracking. Have your programmer place the required snippet of code on the Thank You pages after a sale or sign-up or on other pages you want to track. Your reports will show what percentage of click-through visitors reach that page and how much your campaign has cost per conversion.

  • Be ruthless about dropping keywords that don’t convert! This advice applies especially if you're selling. If your ad is designed for research or for driving people into a real-world storefront, you might want to maintain CTR as your key parameter.

  • If you're using PPC for sales purposes, don't bid more than an average sale (rather than a single item) is worth. As a rule of thumb, spend no more than 10 percent of your average sales amount on advertising if your company is new or 5 percent if you’ve already built an online reputation.

    If you estimate conservatively that 2 percent of people who click through to your site will buy, you must pay for 50 clicks to make one sale! For example, if your average online sale is $100, limit advertising (for a new company) to $10. Divide $10 by 50 to calculate an average bid of 20 cents per click. Of course, you can bid more on some words and less on others.

You can always break the “rules” for strategic marketing purposes. Paying more to acquire a new customer makes sense if you have a history of turning first-time shoppers into repeat buyers. Although online sales may lead to offline sales, you can’t count on it, especially in the beginning.

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