Search Engine Marketing can be an effective, low-cost way to get new customers to find your business online because you only pay when a prospective customer clicks on your ad. Therefore, an important step in setting up your campaign is determining your target budget and how much you are willing to pay each time your ad is clicked. This price may vary by keyword, and can fluctuate from month-to-month.

Keyword Bidding

When setting up your search engine marketing campaigns you set a maximum bid for the price you are willing to pay each time someone clicks your ad. Your maximum bid amount in combination with the relevancy of your keywords to the content on your website influences your ad’s position in the search results. In general, the more you bid, the higher the position your ad will have.

How do I decide the right amount to bid for my Keywords?

Keyword Bidding is driven by supply and demand. The more advertisers that are bidding on your keywords, the higher price value those keywords hold. Keyword value is subject to what the market will bear.

When you enter your keywords you can see the estimated bid required for your ad to reach position number one in search results and determine how you would like to bid based on that information. It should be noted that holding the first position is not always imperative to driving traffic to your website. A compelling offer in your ad can make it successful regardless of position in the search results.

One way to consider pricing your keyword bids is to determine how much you are willing to spend to acquire a new customer for your product or service. For example, if you sell bicycles that cost $700 and your profit on each sale is $100, how much of that profit do you want to put into advertising? This amount will vary by company, but let’s say you are willing to spend $20 per bicycle in advertising costs.

The average conversion rate for paid search campaigns is about 2%, so you would want to bid no more than $.40 per keyword ($20 x 0.02% = $0.40). Remember, your bid is only half of the equation in your search ranking—your keyword’s relevance to the content of your website also plays a factor.

As your campaign progresses an historical data is collected, you will begin to see trends in the performance of your keywords. This data allows you to adjust your bidding strategy and reallocate your spend to keywords that are most effective. A good rule of thumb is to review your campaign performance at least once per month and optimize based on factors such as quantity of clicks and conversion rates.

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Source: Start adCenter

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