Ways to reduce your maximum CPC bid

Reduce your maximum bid

Whether you utilize manual or automatic bidding, you still must enter a maximum CPC bid. This is actually the maximum you're willing to pay; in reality, you may end up paying less.

That's since most PPC ad networks manage your CPC bids so that you don't need to pay more than you need to. This works by the ad network's automatically lowering your maximum bid to a penny or so more than the nexthighest competing bid. So if you bid USD 2.00 for any keyword but the next-highest bid is USD 1.50, you don't pay the entire USD 2.00; instead, you pay USD 1.51.

In addition, most PPC ad networks will lower the maximum CPC bid for ads appearing on the affiliate network sites. That's since most third-party sites have less traffic and generate lower click-through rates compared to search engine results pages. So while you set a single maximum bid, if a click from a given site or page is less likely to result in sales, most ad networks will reduce the bid level for that particular site. In other words, you pay less for lesser results.

Bidding Strategy 1: Bid whatever needs doing to be first

With those bidding basics out of the way, let's look at a few of the various bidding strategies you can employ for any PPC campaign. The first strategy is one targeted at always winning the keywords you select no matter what the price. The thinking behind this tactic is simple. When your ad ranks in the number one position for a given keyword, it appears above the search engine's organic search results for that keyword on the search results page. That's the very best position possible, since it results in more sometimes a lot more clicks and traffic than lower positions.

Of course, you have to pay top dollar to get that top slot, so this can be a costly strategy. That's especially so if you get into a bidding war with another advertiser following a same strategy; when two advertisers are generally intent on being number one, the price of a given keyword can skyrocket. This strategy also has its limits.

Remember, your bid prices are only part of what determines your final ad position; you also have to figure in your site's quality score, which factors in such things as the content from the ad's landing page. So you can't guarantee top position by bidding only, as it's possible to become outbid by a competitor with a higher quality score.

That said, the important thing to this strategy is constant monitoring of your ad's position a minimum of daily. If your position begins to slip, that means someone else is outbidding you, and you'll need to improve your bid.

Bidding Strategy 2: Bid for any specific position

The issue with bidding for that number one or # 2 position is that it's costly and likely to get more costly with time, as other advertisers also bid for all those same keywords. For a lot of advertisers, a better approach would be to bid for any lower position something in the 3-6 range, for instance. These positions will cost you a lot less than the number-one position but nonetheless land you on the first page from the search engine's search results page which typically results in a great CTR for a much lower CPC.

The key to this strategy is to fine-tune your bid once your campaign is running to find the sweet spot you want. Once the campaign is underway, check the average position for that ad in question. If your average position is below your target range, increase your CPC bid for that keyword; if your average position is above your target range, decrease your bid. Like I said, it's a finetuning process, but one that guarantees a decent ROI over time.

Bidding Strategy 3: Bid the minimum

The first strategy presented ended up being to always bid high in order to capture the very best display position for any keyword. The flip side to that strategy is one in which you always bid low to contain your costs and work inside a budget. The thinking here's that you can waste a lot of cash trying to get the very best positions; your budget might be better spent bidding low for your traffic, especially if you have a high quality score that can pull up your position compared to lower-performing competitors. Now, you'll probably never rise to the top spot, however, you may end up on the first page of search results which isn't bad.

This cost containment strategy works if you believe users browse all of the ad listings on the page, not only those at the top. That's not always the case, of course; whether it were, the top position wouldn't pull as effectively since it typically does. Still, quite a few users do consider more than just the first listing, at least on the first page of search results, so there's some merit to this strategy. It's certainly a strategy that's worth considering if your finances are limited.

If you decide to go this route, use manual bidding and try to bid in the lower end of the suggested range. Opt for not bidding on keywords that are estimated to have a high CPC; you might get better results bidding on less popular keywords.

Bidding Strategy 4: Bid high then lower your bid

Here's a quirk in some PPC systems that can work to your benefit; this is particularly evident if you're using Google AdWords. As you know, Google uses the standard score to help determine your ad's position. And one component of the quality score is your ad's click-through rate. You get a greater CTR, and your quality score rises; your quality score rises, and you get a better position which improves your CTR. And a higher CTR makes your quality score increase again…and on and on. You get the idea.

The key here's to realize that if your ad is working and your CTR is going up, thus improving your quality score, you can maintain the same ad position cheaper. That's right, when your CTR rises you decrease your bid level and maintain the same ad position; the raised quality score works in your favor in this regard.

You end up at the same position at a lower cost. This strategy works best if you start with a greater bid level. That is, you go in strong to establish your position, and once your position continues to be established, you can then lower your bid. Naturally, you'll want to monitor your average position and quality score on a minimum of a daily basis and then use your best judgment on when you should change your bid.

Bidding Strategy 5: Bid what it's worth

All of the previous bidding strategies were externally focused; that is, you've goals associated with ad position. But you can also bid by having an internal focus in particular, how much a given keyword is worth to you. If you do a little research beforehand and gratifaction tracking after your campaign starts, you can determine the perfect cost per click for just about any keyword. Here's how to get it done.

Start by determining how much profit you make off a sale from your website. For example, let's say you sell an item for USD 100 retail that costs you USD 60 to buy or manufacture; you generate USD 40 profit on each sale. Next, determine your conversion rate for any given keyword. In most instances, expect your conversion rate to become in the low single digits. For the example, let's say that your conversion rate is 1%, meaning that 1 out of every 100 individuals who click your ad end up buying your product.

Now it's math time. Each sale you make may be worth USD 40 to you, and it takes 100 clicks to make one sale. Divide USD 40 by 100, and you discover that each visitor you attract costs you USD 0.40. This means you can afford to invest a maximum of USD 0.40 per click before you begin losing money on each click. So, in this example, you'd set your maximum price per click to USD 0.40.

This calculation works only when you're selling products or services directly from your website, also it requires a little post-launch calculation. If, on the other hand, you're using PPC advertising to create nonsales leads or build your brand image, the value of each click is much more difficult to determine so desperately, in fact, that each company must know for sure on their own.