Our Pay-Per-Click Marketing five-part blog series distills the EducationDynamics approach to Paid Search. These are the practices that put us consistently #1 in Auction Insights for EDU. You might like some concepts and you may disagree with some. Either way, this overview will help demystify PPC for you, and aid in making better decisions with your media spend moving forward.
To dig in deeper on each topic in our five sections you can download the full free ebook here.
Part Two: Bid to the Max
We talk about this kind of marketing as Paid Search (as opposed to “natural” or “organic” search), and use shortcut abbreviations like CPC or PPC that talk specifically about how much you should pay per click.
How much you should pay per click is mystifying to some folks, but it’s really just a number; and easy to determine at that.
Bidding is one of the simplest aspects of Paid Search marketing, and really, it is the kind of activity that is better left up to machines rather than people. Adept Paid Search marketers spend the vast majority of their time—up to 80%—writing and organizing compelling ads. Why? As we said in our first PPC blog, the Ad Rank formula is:
Ad Rank = Quality Score x Max CPC
Setting the Max CPC is half of it, but the Quality Score is the other half. Setting the Max CPC is simple and just takes a second. You get much more economic advantage by doing a great job on the Quality Score side—which is 75% determined by clickthrough rate and therefore by exceptional ads.
But to show up at all, you do need a Max CPC bid, and in this section, we explore about how to set it.
For purposes of this post, assume we’re maximizing our volume. If you have some other metric you’re optimizing for, feel free to substitute a number.
Setting a Rational Bid
Imagine that you determine the value of a lead is $100. Of course, different leads from different marketing will all be worth different amounts of money. It makes sense to bid different amounts of money for different keywords because of that. But let’s say that a lead is worth $100 for simplicity’s sake.
Say also that your excellent landing page converts at 25%. This means for every 100 people visiting the page, you can expect 25 to fill in your form and become leads.
How much should you bid?
For every 100 clicks you will expect:
- 25 leads, or
- $2,500 in projected value
Because Ad Rank goes hand-in-hand with both winning auctions and your position, in order to maximize Ad Rank, set the highest Max CPC you rationally can.
In our example that number should be about $25 per click.
Do you see why?
We know that at 100 clicks, we will receive:
- 25 leads
- $2,500 in projected value
- And at a Max CPC of $25, we will spend a maximum of $2,500 for those 100 clicks.
Won’t I make $0 at a Max CPC of $25?
Only if you’re actually charged $25. Remember your Max CPC is the most the engine will charge you, not 100% what they charge you all the time. However, in the worst-case scenario, yes, you will in fact make $0.
What happens if I set a lower Max CPC?
If you set a lower Max CPC, you will have lower Ad Rank, which could impact how often you appear and your position once you are there. Remember, this example illustrates how to bid for maximize volume, not some other number.
What happens if I set a higher Max CPC?
You may lose money. Google will only charge you a rate determined by other participants in the auction, no matter what bid you actually set. Therefore, if top of the market sets at about $10, you will not likely be charged $25 per click, even if you bid for $25. You will likely be charged something like $10.02 or $10.05, depending on your Quality Score (so maybe even less than the going rate). However, for competitive auctions where advertisers are bidding similar amounts for hotly contested keywords, you’re more likely to be charged a price at or near a rationally set Max CPC bid. So if you choose $26, don’t be surprised if you pay $2,600 for $2,500 worth of value, losing $100 in value. In my experience, I’m loathe to set such a bid, but different advertisers work from different success criteria.
To revisit how to align interests with marketing partners, read our first blog post of the series, Align Interests .
And for the complete guide to maximizing performance in PPC Marketing, download our free ebook here.