Knee-Jerk suggested minimum bid

Google Adwords modified their minimum bid policy awhile back. Before you had to make a minimum bid for certain terms to get exposure. They claimed this was to help relevancy and quality of ads for certain words. My experience of it was that Google just wanted to increase profits because they could. I believe other SEM marketers felt the same, and so, people stopped bidding on terms that once cost $.05 and had jumped to $.50 or more. Now, they have changed that policy and have implemented a new suggested "minimum bid". We often see this notice in our campaigns:

"Bid is below first page bid estimate of $x.xx".

Of course, the knee-jerk reaction to this is raise the bid to make sure our ads are on the first page. However, we have learned to keep our knee in place, and stick to our maximum bid if it is below the suggested bid for first page placement. Curiously, we often discover that even though our bid is well below the suggested first page price, we still get clicks and the keyword reports show the average position in the top ten. Often the top 5-6, which is below our sweet spot of 3-5, but the cost savings and ROI of staying with our maximum bids exceeds the cost of raising the bid. In short, before you change the bid just because Google, or other PPC providers suggests it, let the campaign run and gather some data as to actual position, clicks and ROI first. Remember, PPC is about maximizing ROI through careful analysis, not ego, or knee-jerk responses to Google’s suggested bid.

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