Google PPC Bid Management - Strategies for Google Pay Per Click Search Engine Bidding

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SEARCH ENGINE MARKETING ARTICLE :
Pay Per Click Bid Management Strategies (page 4)

Google PPC bid management strategy thoughts
Whether you're bidding solely on Google or also on Overture, use the Overture bids for your keyword phrases as the "market value" for the bids. This market value could be the top bid itself or an average of the top N bids where you choose N. Choosing N in the range 3-8 is useful. If you can afford the market value you derive, use it. Otherwise, use your max CPC. That max CPC could be set for an entire ad group or for a specific keyword phrase. Track the ad carefully for a few days. Assuming the bid is high enough and generates sufficient traffic, you should have a good idea of the CTR within a few days. If the CTR is good (at least 2%), lower the CPC and see where your ad falls in the search results. If the CTR is sufficient, lowering the CPC should not result in your ad dropping many positions.

Run a query you've seen in the web server logs and note the position of your ad. Drop the CPC by 10%, wait a few minutes, and run the search query again. Repeat until you remain in the top P positions where P is your goal, perhaps in the 3-5 range. Recognize that keyword bidding is a fluid situation and that Google updates that usually take seconds can sometimes take minutes. Be patient. Some would argue that continually running the same query will penalize you as your CTR will be lowered due to more views but no clicks. For queries with reasonable volume, a handful of searches is inconsequential. Plus, unless you're clicking on your competitors' ads, the denominator in the CTR calculation is increasing across all ads. If your ad's CTR is very good (better than 7%) you will likely be able to drop your CPC in half without a noticeable drop in ranking.

If your ad group has many keyword phrases and there's a divergence in CTR, consider creating multiple ad groups. The more tightly focused your ad group is, the lower your CPC will ultimately become as you weed out poorly performing keyword phrases. Adding negative keywords to each Google ad group will also help increase the CTR and thereby allow you to reduce your CPC.

Conclusion
Before embarking on a PPC advertising campaign, determine the maximum CPC you're willing to pay for a given keyword phrase. Recognize that this value will change over time depending on your ad conversion rate, profit margins, advertising budget and other factors. Adopt different bidding strategies for Google and Overture. On either search engine, don't waste money bidding for the top spot. Examine the paid traffic coming to your site and tailor your bids to the search engines bringing the bulk of the traffic. In doing so, take advantage of bid gaps to save money.