Pay-per-click advertising like Google AdWords puts cost control into your hands. However, managing your Adword costs and maximising return on investment involves testing, analysis and regular adjustments, as business writer Rachel Miller explains
Pay-per-click advertising puts the advertiser in control of their budgets. You can set budget limits - per day and per click through (every time someone clicks on your ad) - so there’s no need for costs to spiral out of control. However, with that control comes a challenge - it’s up to you to monitor and refine your Adwords strategy to maximise your return on investment.
With Google AdWords, you have a choice - you can pre-pay or post-pay. Both methods have built-in limits. If you pay £50 up front, for example, you can then start advertising and charges will be deducted as long as there are adequate funds in your account. Once the money runs out, your ads will stop running.
If you opt for post-pay, Google sets an initial £50 account credit limit. You will be charged when that amount is used up or after 30 days, whichever comes first.
You can choose to spend as much or as little as you like per day. You can choose a maximum daily limit and change it whenever you like. The daily budget determines how often your ads are shown throughout the day. If your daily budget is low in comparison with the cost of your keywords, then your ad won’t appear every time it is searched for.
What you pay depends on the keywords you select. Some keywords are more popular than others and you bid for how much you are prepared to pay. By setting a maximum CPC (cost per click) bid, you limit the amount you are prepared to pay per click on your advert. You can set your CPC bid for ad groups or for individual keywords. The highest bidder will see their ad at the top of the list.
You need to determine how much you are prepared to pay for a click. Ask yourself, how much is it worth for someone to visit your website? How likely is it that a click will turn into a conversion, such as a sale or a sign-up? You can get conversion statistics by setting up conversion tracking on Google Analytics. You must ensure that your daily Adword budget is higher than your CPC bid. Otherwise, your ad won't show. So you could, for example, set a daily budget of £6 and a maximum cost of ten pence for each click on your ad.
It’s important to study your results and other data to get the most out of your AdWords budget. Google offers a range of tools that analyse keyword traffic and cost estimates so you can choose the right keywords and maximise your budget.
Where your ad appears in the list is affected by two things - how much you bid for the keywords and the Quality Score of your keywords. Google gives a Quality Score to your keywords based on how relevant the keywords are to your ad and also to the user’s search. The higher the score the better - it can reduce your cost per click and get your ad in a higher position. So relevance is absolutely critical when it comes to keywords.
You can often improve your pay-per-click results by working on your Quality Score, rather than simply spending more on Adwords. Changing your keywords and phrases or improving your website can have a positive effect on your conversion rates and that, in turn, can have a positive effect on your Quality Score.
Return on investment is the crucial benchmark for judging the success of keywords and pay-per-click advertising. To assess the profitability of a keyword, you can track conversion rates and cost-per-conversion with Google’s conversion tracking tool. You can also use Google Analytics for advanced analysis of return on investment (ROI). With this conversion data, you can identify unprofitable ads and keywords and then improve or delete them.
Everything can be tested and tweaked - keywords and phrases, how much you bid, your budgets, your ads and your website. Your testing needs to be controlled carefully. Make small changes and let them run for a few days so you can evaluate the results properly.