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Should you maximize your
ROI?
Maximizing your return on
investment (ROI) in AdWords is
easy. Just bid the minimum amount
required by Google for each
keyword.
Whether you should do that,
though, is another question
entirely.
You see, if you bid the lowest
possible amount for each keyword,
your ad will appear near or at
the bottom of the list. For a
high-traffic term, that means
your ad won't even appear on the
first page; it may be several
pages in.
The end result? Your ad will be
clicked on once in a blue moon.
You'll generate traffic, but at a
really slow rate.
What if you only achieved one
conversion per year by following
this approach? You would have
achieved excellent ROI, but a
millionaire you would not
be.
Far better to increase your bid,
accept a drop in ROI, and
maximize another
metric:
Profit Generated Per
Unit
Time.
If your bids are too large,
you'll end up paying more to
Google than you need to, and
although the traffic will come
through thick and fast, you might
even end up making a
loss.
If your bids are too small, your
traffic will come through too
slowly.
What I recommend is to start off
small; use a low bid until you
know your campaign is
successfully converting. I
recommend that you bid not
greater than 1% of the amount you
will get for a successful
conversion until you know the
conversion rate. (If you are a
merchant, this is the order price
minus the costs of fulfillment of
that order; if you are an
affiliate, this is your
commission.) But bid an amount
that will get you on the first
page of results, if possible.
Don't go for keywords with huge
competition for
this.
Give it enough time to generate
about 1000 clicks. Don't be too
fussy on the amount of time
involved; just take enough to get
a decent estimate of the
conversion rate. It could be, for
example, a week; two weeks; a
month; a period like
that.
Then increase your bid by a small
amount (a penny, probably), and
wait the same amount of time. NOT
the same amount of
clicks.
If your clicks have increased and
the conversion rate has stayed
the same, you should have got
more conversions. But the traffic
will have cost
more.
So find out how much you profited
from the first period, and
compare it to the profits from
the second period.
If the profits have gone up, try
again for another period;
increase your bid
again.
If the profits have gone down,
drop your bid back to the
starting point, and leave it
there.
Get more from me this Wednesday
at 23:00 GMT. Invest in my
webinar training
here:
Register
here
Remember,
the price goes up after
Wednesday, and then you'll lose
the chance to see the webinar and
ask David Thomas questions
live.
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