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Why You Should Not Maximise the ROI (Return on Investment) On Your PPC Marketing Efforts

Time:2010-03-10 18:41:03 Source:Ezinearticles Author:Dave Thomas

Maximising your return on investment (ROI) in PPC advertising networks is easy. Just bid the minimum amount required by the network for each keyword.

Whether you should do that, though, is another question entirely.

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 will not 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 will 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 maximise another metric:

Profit Generated Per Unit Time.

If your bids are too large, you will 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. Do not go for keywords with huge competition for this.

Give your PPC campaign enough time to generate about 1000 clicks. Do not be too worried about 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. You need a lot of clicks because a low number will not generate a good statistical measure of the probabilities involved.

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.

Be careful if you are dealing with a product whose demand is subject to seasonal variation, as this may invalidate the results of any experiment you are running.

Find out exactly what you need to know about advertising using Google in my popular course, David Thomas on AdWords which you can find at the following link:

http://products.djt-engineer.co.uk/david-thomas-on-adwords/

Google AdWords is a trademark of Google, Inc.

Article Source: http://EzineArticles.com/?expert=Dave_Thomas

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