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Meet the author:
Jill Olkoski

Jill has a MA in Clinical Psychology, a BS in Computer Science, and a BS in Mechanical Engineering.

She currently owns Aldebaran Web Design in Edmonds (near Seattle WA) and enjoys educating her clients on topics related to small business website design.

In Jill's previous life, she spent 17 years in the engineering and quality organizations of a Fortune 100 tech company.

 


Optimizing AdWords – Lowering CPC to Find the Sweet Spot

January 12th, 2009

I recently did an experiment in Google AdWords with one of my client’s accounts to see whether we could lower her CPC (cost-per-click) bid and actually generate more traffic. She was hitting her daily budget limit and couldn’t afford to increase her budget. So we tried an experiment to see if lowering her CPC bids could increase clicks. Read more to see the actual results.

The client’s daily budget was $7.00 per day. She was hitting this budget before the end of each day, and therefore her ads would stop showing. We decided to run a two week experiment in the first half of November and cut all her bids in half. Then in the second half of November, we raised the bids up to halfway between the current amount and the original amount. Here’s an example:

Oct 1 – Oct 31  bid was $2.00

Nov 1 – Nov 14 bid was lowered to $1.oo

Nov 14 – Nov 25 bid was increased to $1.50

This should give you the general idea of what we did. Of course each Ad Group had different bid prices, but we followed the same algorithm of cutting in half, then raising halfway.

Here are the results:

A comparison of the total cost for the three time periods. You can clearly see the budget being hit in October, and then it not being used in early November because we had set the bids too low. When we raised the bids up in mid November, we again were able to use up our daily budget.

adwordsexperiment-totalcost

Next we’ll look at a comparison of the cost per click (CPC). See how the average CPC was lower in early November, higher in later November, and still higher in October.

adwordsexperiment-cpc-comparison

Now for the final comparison numbers. This chart compares two weeks of the baseline period Oct 1 – 13, to the final two week test period, Nov 14 – Nov 25. Notice that the final period had 17.1% more clicks yet the total cost was reduced by 11.9% and the CPC was reduce by nearly 25%! Let’s repeat that, we paid 25% less but got 17% more clicks.

adwordsexperiment-cpc-finaldata

Amazing isn’t it? So if you’re hitting your daily budget, you can try this yourself.

Lower your bid prices by some amount that you think will actually cause you not to use up your daily budget. For this experiment, I picked 50%, but your case may be different. Then, once you’ve lowered the prices too much, raise them back up and do the comparisons for equivalent time periods. If you’re fortunate like we were, you may be able to find a sweet spot, where you actually get more clicks but are paying less for them!

Jill
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J. Olkoski
Aldebaran Web Design, Seattle
Jill Olkoski has a BS in Engineering, a BS in Computer Science and an MA in Clinical Psychology. She delights in using her advanced technical and psychological skills to help small business owners develop cost-effective and successful websites.



8 Responses to “Optimizing AdWords – Lowering CPC to Find the Sweet Spot”

  1. http://seokeywordtips.i.ph Says:

    Your experience seems to sound great to me. However, the question is, how much competition do your keywords have? Because if you are bidding to keywords that have no or little competition then your suggestions can work well to others as your bid will not go lower from the minimum requirement. In my case, it’s different because I need to check the minimum bid requirement from time to time as it becomes higher each day otherwise my ads will not appear on the paid ads portion of the engine.

    And by the way, how many keywords do you have in your campaign? These needs to be shared so we know that your experience is worth doing to our campaigns as well.

    What do you think?

  2. Jill Olkoski Says:

    Due to confidentiality, I am unable to share the keywords in this campaign that was part of the experiment. To answer “how much competition” is a very relative question – but the bids were all between $1 and $3, if that gives you a range. And the number of keywords was between 50 and 100. So we’re not talking about very cheap clicks, or super expensive clicks. Yes, if you’re in a very competitive market, and you find that you are continually being out bid and need to raise your prices, you need to keep up. But this was not the case with this client at all. The problem is not that we were being out bid. We were running out of budget. A very different problem.

    But the point of this article, was to encourage people to do the experiment for themselves if indeed they were hitting their budget every day to see if they could get more traffic for less money. It’s not a guaranteed thing – every single Ad Words campaign is different, everyone needs to run their own experiments.

  3. Gemma Says:

    Hi there,
    I am very new to this “adwords” concept of marketing, and am trying to understand how it could help me in my quest for reasonably priced advertising.

    I don’t really understand about this bidding business – I will study that one – but I have realized that to combine keywords in phrases means a cheaper cost of clicking (example: behang = 1,10/click and “behanger gezocht” = 0,50 and … “behanger gezocht Amersfoort” = 0,05.

    I guess I have a way to go yet?

  4. Jill Olkoski Says:

    Hi Genna,
    When you specify more keywords, it costs less, because you are narrowing down the competition and the potential traffic. This is why “shoes” will cost more than “blue suede velcro shoes” because the competition is less. I highly recommend going to the Google AdWords Learning Center and learning more about this process. It’s a great place and is available in many languages.

  5. Ben Blakeslee Says:

    Hello Jill,

    I found your article very interesting and I understand your point. I was interested in the fact that you have a client with a small daily budget ($9), as mine is low as well. I had my first contact with Google Ads today, and they, in no uncertain terms told me that Google Ads wasn’t for me unless I was willing to spend a minimum of $1,500 per month. They said that the average CPC of my competitors was $1.50/$2.00. Since our average sale is between $50 and $100, I am trying to figure out how to make this work, (or who to believe).

  6. Jill Olkoski Says:

    Hi Ben,
    I guess that it’s not so much about how big your daily budget is, but what are you willing to pay for a customer. I would NOT trust anyone to tell me what the CPC is, I would create my own AdWords account and see for myself – I have plenty of clients who use AdWords at much less per month. However, if you do the math, figure out how much you are willing to pay for a customer, assuming that 1%, or 5% or at most 10% of clicks turn into clients. Paying $2 a click, to make a $50 sale might not make sense, but I’d verify this for myself with an actual experiment, versus listening to folks. So don’t believe anyone, run an experiment for a month.

  7. arthur Says:

    greetings,
    i searched for your article after i noticed that the number of total clicks for a given budget and a rising cpc seems to actually decline beyond a certain point for my product. i think what i saw is consistent with what you are saying in your article.
    i was using the google traffic estimator tool when i noticed what i just described. the thing that got me was that the estimated ad position was very different in the estimator than in my actual results. i guess i am now wondering how accurate the traffic estimator is. i hate the idea of throwing money into something based on inaccurate info. do u find the traffic estimator to be accurate? also is there any way to see click volume as a function of CPC?
    thanks,
    adwords newbie

  8. Jill Olkoski Says:

    Hi Arthur,
    I have never tried to see if the traffic estimator is accurate since it’s based on searches, and all we could ever measure was clicks. Kinda apples and oranges. So I have no idea whether it’s accurate in terms of searches, but it would seem logical the lower the ranking the fewer the percentage of those potential searches you would get. But even a number one ranking in the paid rankings section, would not get 100% of the traffic. But I haven’t seen data that would answer your question. But I would always just use the traffic estimator as a relative tool, to make choices, but not to set client expectations of actual traffic.




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