More is better, right? Hell, it’s the American Way.

“If I have more keywords, I can cover more bases when customers do a search for my products. The more I have, the wider that net is and that means I’ll be seen more. Where can I find more keywords?” Tell me if this sounds familiar?

This is a very logical point of view. In fact, it’s not a bad strategy at all when you set limits and don’t spread the keyword mix too thin. That plan will work fine until you’ve gone too far. That’s when things get out of hand.

Here’s the rub. When you have X amount of budget to spend monthly/daily on keyword clicks, X gets distributed throughout all the keywords you bid on. Keywords that don’t have many clicks and impressions don’t have a high population of statistical data. When the distribution is over a vast amount of keywords, a higher percentage of the budget becomes lost to all the many keywords that don’t produce enough volume of clicks. There won’t be sufficient data to make any assessment to whether the keywords are in fact performing greatly, poorly, or even average. That’s when you’re stuck!

The more of the budget that gets spread over these types of keywords, a higher percentage of your budget is rendered “non-actionable” and potentially wasteful. The only way to assess these keywords would be to wait it out for months or even years. One keyword by itself is not a great danger to your bank account. It’s the aggregate of all the other keywords accruing little data over time that makes this situation expensive and problematic.

When you find yourself here, you become paralyzed in your choices to improve your keyword performance. You simply won’t know where to start. You’ll bleed money through your keywords but you won’t know exactly which ones are killing you.

It is a silent dilemma that goes unnoticed in so many accounts. Advertisers have little understanding how to solve this because they don’t know what they’re looking for. They only know their conversion costs are high and they aren’t as profitable as they would like to be.

In table above, you’ll notice that the highlighted keyword data is substantially low in clicks. If this were taken from a period over a day or two, it would not be long before we could make an assessment on how “most” of these keywords were performing. The bottom four keywords which have only accrued 1or 2 clicks might take some time. If this were data taken from one day of activity, it would be several months before the population of clicks was large enough to assess.

We are not advising that you should pause or delete all low traffic keywords. The recommendation is that you try and keep the percentage of budget spent on low traffic keywords to a minimum.

Take the bottom 4 keywords for example and imagine that 40% of your budget was spent on these types of low traffic keyword variations. Let’s also assume that at least half of these keywords would end up being poor performers. That would mean that 20% of your overall budget allocation would end up being wasteful. The dangerous part is not only that you find out you have been wasting this money but also that it’s taken you months to find out.

This is how advertisers become paralyzed in their accounts. But where does this type of scenario root from? How do advertisers get pigeon-holed into having so many keywords with little traffic?

It’s because more is better, right? Not in this case. Focus the budget more toward higher traffic keywords with good conversion costs and limit the keyword expansion on low traffic words with no conversions that get less than 100 clicks a month.

Chances are you won’t know which keywords work until you test them. Lower traffic words tend to have lower quality scores anyway so just keep an eye on how many you have. Some advertisers have separated high performing keywords into separate campaigns so they receive as much budget as they need. Low performers are then segregated from the high performers and given a smaller budget.

The bottom line: You have to spend within your means. If you have a set budget, spend on keywords that you know to benefit you. If your budget is limited, you won’t receive more traffic by simply having more keywords.

So in our business, the client has passed the dilemma onto us. How are we to manage client expectations with lower conversion costs while increasing the sales revenue?

The trick is to create a separation between strategies that lower conversion cost by lessening exposure levels and strategies that lower conversion cost by weeding out unnecessary ad spend costs.

Ways to lower conversion cost by lowering exposure levels (Lowering Levels of Return):

1. Decrease bid and ranking.

2. Delete or pause keywords, adgroups, and campaigns that do produce some conversions.

3. Add stricter match settings to keywords.

4. Turn on conversion optimizer to lower conversion cost.

5. Turn off search or content networks that convert.

6. Lower producing campaign budgets.

7. Implement position preferences.

The above should be last considered for the purpose of lowering conversion cost.

Ways to lower cost per conversion by weeding out wasted spend and increasing conversion rate:

1. Running Search Query Reports and adding in negative keywords to qualify buyers.

2. Optimizing your adgroups, keywords, ads, and landing pages for higher conversion rates.

3. Optimizing website pages for higher conversion rates.

4. Delete or pause keywords, adgroups, and campaigns that produce no conversions.

5. Turn off networks or network segments that do not convert.

6. Find irrelevant placements in content network. (use site exclusions)

7. Lower CPC by improving quality score.

8. Have competitive pricing.

You might say, “Great! That’s 15 ways to lower conversion cost.” It’s common that advertisers don’t make the above separation between strategies. In fact, we find its more natural to start doing the things that lower conversion cost the fastest. However, it is problematic when you attempt those before trying the techniques that cut wasted spend and increase conversion rate. When that happens, the only result is lower exposure and inevitably lower sales revenue. You’ll need to exhaust the later resources first and then use the other techniques if the conversion cost remains clearly at levels that are unprofitable.

Don’t be pressured into lowering conversion cost the faster, easier way. Take your time to cut the wasteful spend first so it will be easier to infuse growth into you advertising campaigns later. Once you have lowered conversion costs for your unprofitable keywords, it’s time to restore the growth trends back. Below describes that technique in which this is done.

Increasing the Sales Return through Conversion Cost Strategies

Here’s the kicker. This is the part that every advertiser forgets. Only software remembers to do this. It’s the flip side of the coin; the missing link that, if not facilitated, will lead only lead to lower sales volume over time. This is the opposite force that encourages growth. It is actually done mistakenly when you initially start bidding on keywords. Its by mistake because you haven’t looked at conversion cost yet. You mistakenly bid up your keywords only for the purpose of increasing your ranking sales. Now you’ll do it for the same reason but know when to stop.

When analyzing what do do with conversion costs, it is necessary for advertisers to determine a tolerable conversion cost that when achieved, there is considerable profitability.  This is commonly known as Target CPA (cost per acquisition). This is the target marketing cost that when added to COGS (cost of good sold) and subtracted from total revenues, leaves considerable profit. Determining what a reasonable profit margin is will vary between products and services.

Once the target conversion cost or CPA has been established, its important that you increase the bid and ranking as quickly as possible to bring the actual cost per conversion up to the Target CPA level. Here the advertiser recoups lost margins because the return then becomes exponential. More exposure an ad sees at a profitable level, the more profit it can generate. This is why its imperative advertisers choose a happy medium between low profits/high target and high profits/low target.

As soon as advertisers do this, they maximize the profit margins and reverse the trend for lost sales. They stabilize the downward sales trend and reverse the pattern with growth in revenues.

Though advertisers will typically maneuver around the new interface until they can navigate comfortably, most are not enthusiastically diving into routine account management. The result is less time being spend optimizing these campaigns in a time when it is most critical to do so. With less attention being spent in the advertiser accounts, that bigger problems are likely to go unnoticed.

It has gone without much discussion that Google has made changes that remove the “More Sponsored Listings” link at the bottom of the first page of Google search results. Actually, without the link itself, there is not much difference in the way ads are served (or not served.) How many people really go looking for Sponsored Results on Page 2 anyway? The link missing really serves as an calling that there is a much greater movement taking place in the background. It goes back to an earlier change made last year when we saw “minimum first page bids” for the first time.

What happened is Google had implemented visible “minimum first page bids” next to keyword data inside Adwords accounts. They were introduced as an alert for advertisers to increase their bid should they want to remain visible to Google users. Active Adwords advertisers were quick to put these bids in line with first page visibility but some others just let it go by neglect.

The real alert came when ads stopped appearing for Google searches. “Many of your ads may not be showing because they don’t meet the minimum first page bid requirement.” Now that sounds more important, right? If you care anything about your Adwords positioning, you will most likely make the bid jump. These notifications did not cause a huge panic. They were subtle. And most advertisers that noticed them made the bid adjustments paying no concern to what their competitors were doing.

So what has really happened? Google has neatly and quietly ushered all Adwords advertisers to compete for a placement on Page 1. That is of course, that you have noticed and are willing to bid for that necessity.

What happens when you put everyone on Page 1? It’s the same thing that occurs when you put a residential property on the market way below market value; hyper competition drives the bidding prices far above market value. The sellers make out like crazy and the buyers pay more than the property is worth. Advertisers have to pay more for each lead or sale they receive and Google’s stock goes up again.

So what can be done to combat this new competitive arena we are advertising in? After all, Google is unlikely to change it back in the future. It should be noted that these changes put a new burden on us to find out more about how profitable are products and services are.

Things that were profitable before may be less now and we don’t have the luxury of neglecting such data. Unprofitable keywords and adgroups don’t need to be deleted, but they do need to be scrutinized then optimized so that they do maximize the ROI. Making sure your dollars are spent in the most effective way will keep wasted dollars from leaking out the back.

The key is active management in some form. Whether advertisers do it themselves or if we do it, some PPC management is better than none. Keyword Search Pros has the sustained track record of keeping advertiser conversion costs down and in most cases, showing advertisers better performance than they have ever seen before in Adwords.