PPC Basics. Part 6. Bid Management
PPC is different from other advertising media in that it needs to be continually monitored and adjusted based on results. One of the functions PPC managers need to perform on a regular basis is bid management.
Bid management is the process of setting and adjusting keyword and ad group bids. It sounds simple, but it’s not — in fact, there are several expensive software packages out there with the sole function of managing keyword bids.
So what exactly is a bid, anyway? Simply put, a bid is the maximum amount you’re willing to pay for a click on your ad. Bids are also called maximum CPC (cost per click) or Max CPC.
While this sounds easy enough, there are some key misunderstandings when it comes to bids. Let’s clear those up before we go any further.
Articles in This Series
- Part 1. How Paid Search Fits into Your Marketing Mix
- Part 2. Keyword Research
- Part 3. Account and Campaign Settings
- Part 4. Keyword Match Types
- Part 5. Ad Copy Development and Testing
- Part 6. Bid Management
- Part 7. Quality Score
- Part 8. Evaluating Data
- Part 9. Dayparting
- Part 10. Geo-Targeting
Misunderstanding #1: I always pay exactly what I bid for every click.
Remember, your bid or Max CPC tells the PPC engine the highest amount you are willing to pay for a click. However, the actual amount you pay is almost always less than the amount you bid. In PPC, your actual cost per click is based on your Quality Score, which is calculated based on your max CPC, your click-through rate, and other factors.
So if you’re bidding $1, you may end up paying only $0.49.
Let’s take a minute and talk a bit more about Quality Score. It seems complicated at first, and PPC experts like to discuss at length the fine points and details of Quality Score. We’ll talk more about Quality Score in a future installment in this series. At this point, it’s important to note that if you’ve followed the steps that I’ve outlined in this series of articles, you have a good chance at getting a good Quality Score.
Misunderstanding #2: I can get the #1 ad position if I bid more than the other advertisers on the page.
This is a common PPC misunderstanding; most newcomers believe that PPC is a pure auction, with the top spots going to the highest bidder. While this was true of some PPC engines 10 years ago, it’s not true of any of them today. Advertisers with very good quality scores can and do appear above other advertisers who have set higher bids. This is why it’s so important to follow best practices when it comes to keywords and ad copy.
Incidentally, this is also why PPC is so great for all advertisers, both large and small. It’s not just those with the largest ad budgets who control the space; those with more modest budgets can still outrank larger advertisers by using best practices and being smart about their bids.
Misunderstanding #3: I should set my bids really low so I don’t spend too much money.
Many new PPC advertisers want to test the waters by setting very low bids, sometimes at the minimum level of 10 cents per click. The thinking here is that they want to reduce their risk by bidding very low — that way, if PPC doesn’t work, they haven’t lost much money.
While this makes sense on the surface, I don’t recommend it. Although PPC isn’t a pure auction, your max CPC is part of the bidding algorithm that determines your ad rank (position on the page). If the bids are very low, even the ads with the best quality score will still not appear in top positions because of their low bids.
New advertisers are at an even bigger disadvantage, because their account has not established a Quality Score yet. Quality Score is based on account history. Accounts that have historically performed well will be assigned a good Quality Score when new keywords are added to their account; accounts that have performed poorly will be assigned lower Quality Scores.
New accounts, though, have no history. Initially, therefore, Google looks at the performance of other advertisers bidding on the same keywords, and assigns you a Quality Score based on that. So really, you’re at the mercy of others in the beginning. Therefore, it’s best to bid more when your account is new, and then reduce bids after a Quality Score has been established. Don’t fall into the trap of setting low bids to “test things out.”
How to Set Bids
Now that you understand what bids are and how they work, let’s talk about actually setting and managing bids in your PPC account.
In both Google AdWords and Microsoft adCenter, advertisers must set bids at the ad group level. This means that you will assign a maximum bid for all keywords in the ad group. In adCenter, the ad group bid screen looks like this:
The AdWords screen looks very similar:
To enter a bid amount, simply type it into the space and click “Save.”
How Much Should I Bid?
The answer to this question depends on your business and what you’re advertising. If you’re trying to generate leads or are offering a free trial, you probably won’t want to bid as much as you would if you were selling expensive jewelry.
So how do I know where to start? Both AdWords and adCenter will estimate how much you need to bid to appear on the first page. This is a decent starting point — but remember, these are estimates and are often on the high end. Still, if you’re comfortable with the amount, it’s a good place to start; you can always reduce bids later.
Keyword Level Bids
In addition to ad group bids, advertisers can also set bids for individual keywords. For example, let’s say you have one keyword in an ad group that’s converting at a significantly higher rate than the other keywords in the ad group. Because this keyword is doing so well, you’re willing to pay more for clicks on this keyword. In this case, you might want to set a higher bid for the good keyword than you’ve set for the other keywords in the ad group.
In AdWords, navigate to the Keywords tab, and then click on the Max CPC for the keyword you’d like to edit. A dialogue box appears, like this:
Just enter your desired bid and click “Save.” In adCenter, the process is nearly identical.
One caveat to using keyword bids: the keyword bid supersedes the ad group bid. This means that keyword level bids do not change when you change your ad group bid. You’ll need to remember this if you’re making dramatic ad group bid changes — any keyword level bids will need to be changed individually.
Managing Bids over Time
As your PPC account acquires performance data, you’ll want to adjust your bids accordingly. Reduce bids on ad groups that are not performing well, and increase bids on ad groups that are doing better than average. Over time, you’ll be able to build on the success of your best-performing ad groups and eliminate the poor performers.
With daily oversight, bid management doesn’t have to be an arduous task. Keep it simple in the beginning for best success.