Set Your Cost Per Click
Once you have set up your keyword list and written your pay per click (PPC) ads, you will be asked to set a maximum cost per click (CPC) for each keyword. This does not mean you will automatically be charged this price each time someone clicks on your pay per click ad. The amount you specify is just a bid. It states you are willing to pay up to, but no more than the amount per click. You will only be charged the amount necessary for your pay per click ad to beat out the closest competing bid. Your ad's history of performance also plays a role in your ad ranking.
You should keep in mind the limitations of your daily budget when setting the maximum CPC. If you have a daily budget of $3.00, and your maximum CPC for each keyword is $3.00, you could potentially only receive one click per day. Once your pay per click ad is clicked and you are charged for $3.00 (or less), your ads would stop running because your daily budget was reached.
You will only be charged the amount necessary for your pay per click ad to beat out the closest competing bid.
When setting the maximum CPC for each keyword you should also take into account the popularity of that keyword for search. It is generally better to avoid “round” numbers such as .00, .25, .50, .60, .75, etc. By making your maximum CPC .77 instead of .75 you have a greater chance of outbidding and the more common .75 bid. It’s a bit like the $1 strategy on “The Price is Right” in reverse. Most pay per click services offer an estimating tool as to how much a particular keyword is expected to be searched on and also an estimated cost to appear in the top positions. This is a good starting point, but your cost per click should settle out once you can make decisions based on real results.
Most pay per click advertisers want to get as many visitors to their website as possible but you need to be careful. Do not be tempted to increase your bids beyond a point where your ROI is not profitable. Sometimes advertisers get caught up in the drive for more traffic and this may not be cost productive. If you have to pay more for a visitor than they can potentially earn you, there is no point in setting the bid.
You can figure this out by reviewing your conversion rate. Most pay per click services offer advertisers the ability to track and record their conversions. This is done by placing a small amount of HTML and Javascript code on the page where conversion action is complete. When the visitor arrives at this page (after clicking on the pay per click ad), this lets the PPC service know the click through resulted in a conversion.
If your keyword has a low average cost per click with a high conversion rate, then you should consider increasing your bid. This will likely raise your pay per click ad ranking and give you more exposure which could translate to more clicks and conversions. However, if your keyword has a high cost per click with a low conversion rate, then reduce your bid. This will decrease your pay per click ad's exposure. Basically, this decision improves your return on investment by reducing the impact of a poorly performing pay per click ad. Internet traffic is changing all the time so you have to allow for time between changes.
When you make changes to your cost per click, use small amounts. Do not make big changes in your bids. Your pay per click campaigns will be much more cost effective and give you a better ROI if you make small changes. In addition, allow some time between bid changes so you gather enough data to see how effective your changes were.
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