· You will understand how to be a powerful bidder on Adwords · You will understand how certain people and big websites can afford to pay high amounts for clicks (and how you can do it too!) · You will learn how to estimate exactly how much you should bid · You will learn how to avoid losing money on Adwords (cut your losses!)
Why must I learn the Power Bidding Strategy? First of all, if you don’t you will probably keep going round in circles. You will keep putting money in and not getting anything back for it. Except a huge debt of course.
When you do understand this strategy, you will only put in what you expect to get back. I will show how to do that in a bit.
People who don’t know how to bid are losing a great opportunity to make more money. You have to be a Power Bidder – Adwords is not a game for little girls(or little boys, for that matter).
Power Bidding Strategy is...... simply a system that allows you to know how much to bid, when to bid and when to cut your losses. Kind of like investing in stock.
Now, any time you invest everybody will try to lie to you. But there is only one thing you can trust...
You can only trust the numbers!
So this means, we will have to look at numbers as the true indicator of what is going on in our Adwords Campaign.
The strategy you are about to learn is on two levels. We will look at the basic level first and then at the more advanced one.
I have also provided a free Power Bidding Calculator on my blog: http://AdwordsMogul.com/adwords-power-bidding-calculator I have to upfront with you about this.
I would like to paint a pretty picture here but my conscience won’t allow me.
Even though Adwords is accessible to everyone, it is not for the faint of heart.
You have to be willing to take a risk and you have to be able to stick with it. Adwords is not a quick and easy way to make money – it is simply another tool you can use for your business.
It is absolutely essential that you pay attention to what I am telling you here if you don’t want to join the ranks of those who underestimated the value of having a bidding strategy!
Here is how regular people bid on Adwords:They have a bunch of keywords and they want to make money from them. They write some ads, and of course they don’t know anything about Quality Score.
Then they pay as much as it takes to get to the number one position. They spend quite a bit of money on that, and guess what? They don’t even know whether or not the campaign is working or not!
They kind of hoped that they would setup the campaigns and ads, put some keywords and wait for the money to start rolling in.Well, that’s a very quick way to max out all your credit cards. On the other hand...
...here is how a Power Bidder would do it.
Step 1
First of all he would look at how much customers spend with him on the average.
Let’s say he is sells guitars on his website. So he knows that usually a customer buys a guitar and some accessories.
The total order amounts to $500 on the average.
The product costs him $300 to acquire so his profit is $500 - $300 = $200. In other words 1 customer makes him $200.
Geek alert! Conversion rate: This is the percentage of people who actually buy after visiting your website.
The formula for Adwords conversion rate is:
Conversion rate = Number of buyers/Number of clicks
This means his conversion rate is (3/200) = 1.5/100 or 1.5% . In other words out of 100 visitors, 1.5 of them buy.
We already established that 1 customer = $200 of profit. Therefore 1.5 customers = $300 (1.5 x $200).Step 2
At this point it becomes very easy to calculate our bid.
We proceed to calculate how much we spend per visitor.
So now we get: $300/100 = $3 per visitor. Can you see it now? This means that to break even we can bid a maximum of $3 per click!
Always calculate the profit first and then calculate your bid – like a true Power Bidder!
At this point, we can see that if we want to make a profit we have to bid less than $3 dollars per click.
Remember!
1. Always make sure that you have created the most relevant and attractive ad first before you make your campaigns go live.
2. Only then are you in a good position to bid and make money from it.
3. If your cost per conversion is higher than your profit you have to adjust your strategy. You can
a. Cut your losses and get out of the game
b. Improve your Quality Score so that you pay less for your clicks c. Improve your landing pages so that you get more conversions d. Find a way to increase your profit margin
e. Restructure your business so that the higher cost per click actually puts you at an advantage over your competitors. Read on to understand this better.
Well, yes and no.
Some of them may make quite a bit almost immediately.
Others look at yet another, crucial number. And this winning number is... A customer’s lifetime value! This is how it works:
1. They know that if they provide a good service in the beginning, many customers will come back for more.
2. They set up their business in a way that allows them to sell to customers multiple times instead of just once.
3. They constantly keep track of what each of the customers spends over time and base their bid on that.
For example:
Our guitar buyer may also be interested in other guitar related products.
If we track his purchases we will see that in a year he spends, on the average another $1000 dollars with us. Very often, premium products have a very high profit margin. Let’s say in this case it’s $500 dollars of extra profit.
So a business setup this way can afford to bid more than the $3 we just calculated.Even if they bid $5 and seemingly make a loss on the first sale, they still end up making a huge profit because the visitor comes back to buy more stuff from them!
Let’s look at these new numbers:
In the first calculation we arrived at a profit of $300 per hundred visitors. Our conversion rate was 1.5%.
We agreed that this $1000 brings us a profit of $500 since it is a premium product with a high mark-up.
Therefore 1 person who buys = additional $500 of profit.
Since out of every hundred visitors 1.5 people buy from our site: Our profit becomes 1.5 x $500 = $750!
Our maximum bid is: $750 /100 = $7.50
Or in numbers terms:
Cost of Adwords = $5(CPC) x 100 visitors = $500
Final profit: = $750 - $500 = $250.
See?! And that’s what I call Advanced Power Bidding!
Ninja Tactics:
Fortunately, Google has made it easy for us to see how much money it costs us to make each sale. It is crucial that you don’t even let your campaign go live until you’ve done this:
Tactic # 1 Install Conversion TrackingGeek Alert! Conversion: every time someone buys or signs up for a newsletter etc. on your site, it’s called a conversion.
Conversion tracking : It is a simple (and FREE!) to use tool that lets you know any time somebody buys something from you or signs up for your newsletter etc. As a direct result of clicking on your ad.
This allows you to quickly see how much it costs you to get one conversion.Also, it helps you to understand whether or not your Adwords campaign is bringing you the desired results.
To install conversion tracking:
You can download a free guide from Google that will give you step by step instructions, depending on your website type.
Here is the link:
http://www.google.com/adwords/select/library/convtracking_jan05.pdf
Ninja Tactic #2
After you have installed conversion tracking, allow between 200 – 500 clicks, depending on your budget.
This should give you a good idea of your conversion rates.
Then you can adjust your bids – for instance you can reducing them slightly in order to increase your profit.
If you are not getting many conversions from your ad, chances are that your landing pages don’t appeal to your visitors. There could be many reason for that, which are beyond the scope of this report.
It is also possible that your landing page doesn’t exactly match what your ad promises. This may happen if you direct your visitors to your homepage, instead to a specific page that deals with the product advertised in the ad.
Ninja Tactic #3Use your free Power Bidding Calculator to help you find a perfect bid for your ads.
Just follow this link:
http://AdwordsMogul.com/adwords-power-bidding-calculator
At this point:
· You know how much to bid for each of your keywords · You also understand why some companies can afford very high bids · You will avoid the trap of bidding blindly simply to get to number 1!
· You have installed conversion tracking to help you quickly see the results of your Adwords Campaign.Great! For the Grand Finale let’s look at the last Adwords Profit Secret: