Pay-per-click advertising like Google AdWords puts cost control into your hands. However, managing your Adwords costs and maximising return on investment involves testing, analysis and regular adjustments, as Rachel Miller explains
Pay-per-click advertising (PPC) 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.
Paying for Google Adwords
You can pay for Google AdWords with a credit or debit card or via a bank payment. Because you set the limits for how much you want to spend, you should not get any surprises when it comes to the costs.
Daily AdWord budgets
You can choose to spend as much or as little as you like. 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. If you commit to a budget of £6 per day, Google will provide additional support - with setting up, creating your ad and optimising your campaign - for free.
Maximum cost per click
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. If lots of people are bidding on the same keywords or phrases, there may be a long list of ads when someone searches for those terms.
Setting your cost per click bid
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.
Analyse your traffic and conversions
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.
Your position in search results
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.
Quality not quantity
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.
Track your ROI
Return on investment (ROI) 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 ROI. With this conversion data, you can identify unprofitable ads and keywords and then improve or delete them.
Test and refine your AdWords strategy
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.