Mike recently asked the Affiliate doctors this old chestnut:

“Posts about PPC on Limited Budget and How Much Cash for PPC are a fantastic resources for newbie “PPC Am’ers”, with a lot of good information to make sure that one shouldn’t burn their fingers.

But one of the important issues that isn’t really covered is, “How to bring down the CPC for maximum profit or getting sales”.

It would be really nice to see a post or answers from the Doctors covering this important bit.  Is there something that can be done even if the “Reverse Engineering” doesn’t work, or where you spend more than you earn, even if you have high QS (Quality Score).”

The responses we had from the doctors was nothing short of exceptional, and their take on this incredibly vital element of PPC which can help you cross the line between profit and loss was so detailed that we felt the only way we could do their responses justice was to split their answers into three parts, which we will post over the festive period.  So forget watching the Sound of Music or Mary Poppins for the umpteenth time this year – Grab yourself a glass of Egg Nog and settle in for a PPC Master Class!

First up to answer Mike’s question is Shane:

Excellent question Mike, this is like the nirvana of PPC … so just how do you bring down the Cost Per Click (CPC)?

A side note on positions before we get stuck in …

PPC Positions

In general, I see number 1 position as the “Idiot spot” in most (but not all) cases, that’s not to say it doesn’t work and shouldn’t be used, but we typically see that the best Volume and ROI combination is found between position 2-5.  So if you are in position 1, don’t be afraid to step out of it and test different positions, as people do click a few ads to compare, and you may actually even see a jump in sales by dropping to position 2 or even 3, especially if your offering is the same price or better quality as those who take position 1 or 2!

So firstly consider dropping a position to test the difference, as the CPC should drop and the conversion will probably rise resulting in a better ROI percentage.

Don’t Focus on the Cost Per Click Directly…

Okay, to answer the main part of the question; to reduce the CPC we don’t actually focus on the cost per click directly, we focus on getting other factors sorted which then directly affect the cost per click … it pays to always remember that Google rewards relevancy as they figure it leads to a better user experience and thus indirectly yields more cash for them in the long run when happy users keep coming back.

So it’s factors which affect the Quality Score (QS) that we focus on, as in general, the higher the QS, the lower your costs and the better your ad position, which in turn leads to a better Click Through Ratio (CTR), lower costs etc..

Focus on Relevancy!

We focus on relevancy as the key point.  The first thing we do is look at the campaign structure, then adgroup structure, we may move adgroups into more suitable campaigns or create new ones, then we’ll look at the keywords and assess the relevancy of the keywords to the adcopy and landing page.  If the relevancy isn’t good enough, we will then split those keywords out into very targeted adgroups with 2-4 ads each.

… Then Focus on Click Through Ratio

We then focus on getting the Click Through Ratio of each keyword as high as possible.  We do this by use of exact matching as well as using phrase match, but the most important point is we spend as much, if not more time looking for negative keywords to cut down the number of wasted impressions.

Reducing your impressions by say 25% boosts your click through rate by that same amount, which in turn gives that element of the QS boost leading to benefits such as a CPC discount, better position etc..  This is also where smaller adgroups with targeted adcopy come into play; we try to get the main keyword into the advert headline, body and even url sometimes so that it bolds up when searched for, but this is hard if your adgroups aren’t tightly themed enough around one or two main keywords and their variations!

Review the Adcopy

Once we’ve done the above steps, we regularly review the adcopy in use, editing the lower performing ones so that over time, we find the best 1-2 ads to use that really do connect with the users that are searching the keywords we bid on.

We also make sure that the landing pages are highly relevant to cut down the bounce rate and maximise conversion, so we may create a specific page for each adgroup or even keyword! so that the user sees the keyword in the page that they have in mind etc..

Google is now offering a tool to some advertisers try to help them boost relevancy; very useful for targeting on broader/brand terms.  If your account is eligible, then their “sitelinks” feature may help boost your CTR and could also cut the index page bounce rate down dramatically for some advertisers – Google Sitelinks

Quality Score

You could say the overall benchmark for doing all this targeting work is Google’s QS – that’s their measure of how good they think things are running.  So if we fire up adwords editor (so much faster than using adwords site) and take a look, we generally see that the keywords that are rocking and making us/clients tons of cash are generally scored 7-10 (which is a by-product of us doing the work detailed above).  In addition, our CPC’s on those keywords will typically be tens of percent less than when we started.  If you bare all of these factors in mind, you will have the answer to the main part of your question on how do you reduce the CPC!

Quality Score is based on several factors … pay attention to the points in bold:

1. The historical click-through rate of the keyword and the matched ad on Google – (do good work from the start! Negatives, phrase and exact match, targeted ads)

2. Your account history, which is measured by the CTR of all the ads and keywords in your account –  (don’t run slack accounts with just a few winning campaigns in there)

3. The historical CTR of the display URLs in the ad group – (don’t let bad history develop … start targeted well and then target harder over time etc.)

4. The quality of your landing page

5. The relevance of the keyword to the ads in its ad group – (tightly themed adgroups)

6.The relevance of the keyword and the matched ad to the search query – (tightly themed adgroups use of negatives and good matching with targeted adcopy to keyword)

7. Your account’s performance in the geographical region where the ad will be shown.

8. Other relevance factors (it’s Google, so they reserve the right to sting you and not tell you why! Lol)

You can read more here:

https://adwords.google.com/support/aw/bin/answer.py?answer=49174

One thing to bear in mind though is just because someone else is active on a keyword, it doesn’t mean there’s money in it for you. They could be broad matching some other term, they may not be measuring their sales on a keyword basis (some lazy affiliates especially ;)), or they could have a better deal than you etc., so the CPC may never come down low enough even with a TQ of 10 for YOU to make money.

The second part of your question relating to if you have keywords with a 10 QS yet need the CPC to come down still further, this is possible but again it’s more to do with targeting harder in the long run.

The obvious thing is to drop a position, it should be cheaper for you, which may not be as bad a thing as you fear, especially if you are in position 1 or 2, although with lower positions come less traffic, but there is usually a higher conversion rate so the ROI is higher but with less volume overall.

If you would rather hold position, then you may find that the following helps

– Create an adgroup for each of the keywords on exact match
– Use that keyword on each line and work it into the adcopy that promotes any unique selling point

This may boost the CTR enough to bring the CPC down. Even on high volume traffic we’ve regularly hit high 20’s to 30%+ CTR’s this way, so even with a 10 QS if you increase the CTR your CPC should lower.

A Case in Point

Here’s an example of the CTR’s of 3 exact matched keywords spending almost £120k in tightly themed adgroups with laser targeted adcopy!:

The £91k spend keyword ran at 32.30% CTR, sales worked out at £2.21 in commission for every 96p inbound click, which equates to a profit of £1.25, just over 130% ROI.

Just lowering the bid amount itself means that over time your ad position will probably begin to fall, especially if it’s a volatile sector where competition is strong.  So if you want to maintain position, it would also be wise to focus on boosting the CTR and QS instead, but remember that buying the traffic is only one part of the equation!  Once you have users on site, you need to maximise your landing page conversions as it effectively makes your clicks cheaper.  When conversion increases, your Cost Per Acquisition (CPA) comes down, so you can effectively pay more to get that traffic in the first place.  This is sometimes why sending direct to merchant isn’t ideal and you may do better as an affiliate by creating comparison pages.

A friend of mine who sold his company for several millions of pounds last year said he didn’t worry too much about micromanaging the CPC (his account was very well managed), but he focussed on squeezing every single conversion out of their landing pages as possible.  This way, even though he was paying the same high CPC (finance sector is so ouch!!) as everyone else, he was converting that traffic around 30% better than the competition which in turn effectively lowered his CPA.  So dropping the CPC is only part of the solution!  You should be using Google’s free website optimizer tool (and other feedback/testing tools) to really hone your landing pages to maximise conversions!

PPC is quite easy .. well the fundamentals of it are, you just have to do the work … that’s the hard bit

There is no shortcut to relevancy!

Editors Note:  Wow!  Thanks Shane for a fantastic master class lesson in reducing CPC spend on PPC campaigns – Hopefully Mike and our other AD readers will have found it useful (I know I did!) … Don’t forget to check out Affiliate Doctors throughout the festive season for the other Doctors take on this question.