Question About Placement Vs. Profit

I'm looking PPC costs for a clothing category and I'm trying to determine what my maximum bid should be.

I realize that higher placement means more click throughs, but does that result in higher profits? Afterall if a higher ranking gives me greater sales, but the margins are terrible, it may not worth doing.

I'd like to hear other's experience on what they found work the best in terms of generating a good retun on PPC. Specifically, how does getting top five compare to getting placed 5-10, 10-15, 15-20? In my case, I would be using PPC to target a subset of a particular clothing category and will only have one or two direct competitors.

You should start on the minimum bid at first, and keep tuning your keywords for about 3 weeks.

Let's take the example of google adwords.

We started with £0.04 for all our keywords. We got experience on how to write creatives, and target specific keywords, until reaching the point where we were profitable.

Then, we ran statistics on each adgroups (set of keywords leading to the same link on you site), and figured out how much sales a click was generating : it gives you then the highest bid you can put to get more traffic, and still making money.

Well you can always have a conversion tracker on your signup forms or order confirmation forms. To track you customer customer

Not necissarily. Using negative keywords w/ high bids is a good way to target higher placement, but not waste click throughs on non-potential buyers.

for example, I always use the negative keyword 'free'....I'm not giving anyhting away!!

Than you are breaking the TOS.

I stick with paying .10 because anything more and I'm not making a profit.

First, write ads that are VERY relevant for the keyword, they will get you higher placements and higher CTR.

Then know your profit margin and conversion rate for the items that you are promoting... you can do a little math from that and determine how much to bid.

Most of my adwords ads land on pages that get no other traffic.... and those pages have shopping cart codes that I can recognize. This allows me to assess the results of my ads - bidding more where the bottom line allows and getting my money out of terms where surfers will chew a hole in your wallet.

If you are spending big bucks on adwords and are not collecting and doing math on this data - then you are most likely throwing at least some of your money down a rat hole. For the main terms that I monitor I belive that there is a sweet spot in the rankings that gives me maximum profit PER DAY.

Ah - This old chestnut.

This comes up at every 'progress meeting' I have with the clients that I manage PPC campaigns for. They take a cursory look at the stats and say "why are we bidding on this term?" and "shouldn't we be higher for this term?".

The answer is difficult to judge, particularly when you have 100's of keywords and a specific budget. What you really need to do is model the correlation between your bid position/cost and the return that you get for each keyword (or ideally each keyword / ad text combination). You can then combine these and solve for one hell of a non-linear equation. Local maxima aside, this should then give you (one of) the theoretical optimum bid position combinations.

That's a lot of maths - I'm happy to share my experiences if you want to get in touch.

Bid level, profit margin, ad wording, landing page effectiveness.... lots of variables, and time as the universal denominator. Anyone not doing math is a fool.

Thats putting it nicely EGOL

You'll still always have the crazies that bid $45 per click.

If you bid low for an adword and are on the second page that automatically screens out timewasters in my opinion - page one attracts "window shoppers". If somebody is genuinely looking for the item involved they are going to look properly and that at least means the second page.

I also agree with bidding low to start with simply to feel your way and amend copy. Adwords places you on a bid x click basis. So even if your bid is low .04 (UK pence) and you get a lot of click throughs you can still be ahead of others who are bidding higher purely through the quality of your copy.

If you are targetting a subset using targetted phrases at a low bid and you are likely to appear on the first page anyway. Although I have found there are a lot of directories and others out there targetting any word or phrase that moves with no end user benefit (Ebay are the most prolific) and this is bound to be the same for your area. This is another reason where the second page weeds out browsers if they go off at a tangent they were unlikely to be a buyer anyway.

http://help.yahoo.com/help/us/ysearch/sponsor/sponsor-01.html

From what I read, it can really differ from industry to industry.

For me, bidding around the #3 spot has produced the best ROI, but you can't expect to know anything before trying.

Track data for several months, and change the bid position each month to see how it effects your ROI.

If the margins are terrible IT IS NOT WORTH doing - there is no point in working for next to nothing!