Strategy #5: Bid HighThen Lower Your Bid
This is the strategy I like best, even if it’s the most time consuming. If you’re not adverse to doing a bit of work, you can ensure high placement while lowering your costs over time.
It’s all due to a quirk in the Google Adwords system. As mentioned previously, Google uses something it calls the quality score to help determine your ad’s position. One important component of this quality score is your ad’s click-through rate. This strategy works by playing the CTR to improve the quality score, and thus let you bid lower over time.
Here’s how it works. You start out by bidding high, which results in a high position on Google’s search results page. A high position typically generates a high CTR, which in turn increases your quality score. As your quality score goes up, Google automatically gives you a higher position, which then improves your CTR, which then improves your quality score, which then improves your CTR... You get the idea.
What’s important is that if your ad is working and your CTR is going up, thus improving your quality score, you can maintain the same ad position at a lower cost. That’s because when your CTR rises you can decrease your bid level and maintain the same ad position. You end up at the same (or higher) position at a lower cost.
For this strategy to work, you have to start with a relatively high bid level, to establish a high position. Once your position has been established, you can then lower your bid. Your high position should be maintained.
Naturally, you need to monitor your average position and quality score on a daily basis. From there, use your best judgment on when to change your bidthus lowering your total advertising expenditures.