How Much Should I Bid for a Click on AdWords?

new google adwords logoYou’re probably keen to know how much it actually costs to advertise on Google. AdWords is an auction where you bid against other advertisers for a more prominent position. But how much should bid for a click? Or to use AdWords-speak – what’s my Maximum Cost Per Click?

There’s no one answer, because all businesses are different.

Auction hammer

In the great auction that is AdWords, how much should I bid?

One business – for example a lawyer – might have high-priced services with a small number of customers, and another – for example a hardware store – might sell low-priced products to many customers.

These two types of business are very different so the bid price for one click will be very different.

Nevertheless, there ‘s a simple formula that can help you work out how much to bid for a click.

Net Profit Per Sale x Conversion rate%

Your Net Profit Per Sale is the average amount that you make on any sale, after you deduct all your costs.

Your Conversion Rate is the percentage of people who click your ad and then go on to buy. Before we start our campaign we have to guess what the conversion rate might be – that’s where experience of running many campaigns comes in! Let’s assume a typical conversion rate of 1% – 1 in 100 people who click your ads go on to buy a will.

Now let’s work out your maximum bid price.

If you sell a will-writing service for £500 per will, let’s assume your Net Profit Per Sale on each will is £200.

So your Net Profit Per Sale * Conversion Rate is £200 * 1% = £2. Your maximum bid price for clicks will therefore be £2.

That’s just to break even, of course! You’ll want to make money on each sale, so perhaps a better maximum bid price would be £1 – giving you a clear £100 profit on each sale.

For more advice on AdWords, why not get in touch?

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