It's the most common error I see with clients who have been running their own PPC campaign, and the bigger their budget, the more likely they are to make it: They want to be #1 - and they want to be there for anyone who might possibly be searching for what they offer.
I can't blame them. It does intuitively seem like being in the number one spot would be ideal. It does, after all, generate significantly more traffic, and often a high click-through rate. Just think, if you have enough money, of all the people you could direct to your site if you can afford to be in the number one position for your most general term! An auto dealer that's #1 for "car," or a home loan site that's #1 for "mortgage" - assuming they have enough money - surely would benefit tremendously from this kind of placement.
And because of this, it can be difficult to convince a client that their favorite position, as sexy as it seems, may just be the least fruitful. It may simply be scattering their seed on barren earth - and the results it produces may be so costly that they take away resources from more fruitful areas of the campaign.
It's easiest, perhaps, to explain why a general term like "car" is not the best term for
anyone in a PPC campaign. Simply put, the percentage of people searching on that term who are looking for what you offer is too small. Even if you rule out, with your ad copy, those who are looking for a review or automotive history - there's still far too much variation in what people mean by "car" in their heads, which didn't make it into the search bar. Even if you do have dealerships across the country, chances that you offer every make and model of vehicle are slim.
People typing in general terms are also generally early in the buying cycle, and doing research. They don't know yet quite what they want, and are unlikely to decide on this visit to your site.
A little harder to grasp is why the number one spot itself is rarely ideal. I guess the main idea to get across is the behavior of searchers. People type in their search - then click on the first result, often without even reading it. Only after getting to your site, and costing you a click, do they stop to notice that it's not what they had in mind at all. People who click on the results further down are more likely to have actually read the ad, and be thinking about what they want before they click. In other words, lowering position, while it may reduce the number of clicks you get - also is more likely to let your ad copy do its job to pre-qualify those clicks.
A recent example - I took a client from the top spot on most of their keywords, costing them several dollars per click, and lowered them to #2 and #3. They saw their cost per click drop nearly in half - but were uncomfortable about the fact that the total number of clicks also dropped dramatically. However, those who clicked were far more likely to remain on the site - with half as many clicks, their page views went up from 37k per week to 40k. I have had several clients who found that once they moved down to the 4th - 6th position for most terms, their conversion rate went up. Yes, they were getting fewer visitors overall, but a higher percentage of those visitors were making purchases - and at a lower cost-per-click, the cost per acquisition went way down.
One other danger of being in the top spot - especially for a general or popular term - is that this spot is more likely to be a target for click fraud. It's simply easier for affiliate-type fraud, to click on the top spot. And for competitor-type fraud, well, everyone wants to take a shot at the big guy.
There are some cases, however, where being in the top spot makes sense. That's for the company's own name or brand. Potter Barn could benefit from being number 1 for all terms with "pottery barn" in them. It's not always as cost effective as a lower spot, but it is good branding - and if someone is searching for a specific brand name, especially if they offer their own product for service on their website, chances are good that they will be happy to end up on that company's website. I would, however, put a cap on the CPC for those terms, as it's not unusual for someone to try to make it prohibitively expensive for a well-known company to buy their own brand name, by making their max bid absurdly high.
But it can be scary for the client to let go of that top spot, especially when they see traffic dip - so just make sure you have your tracking in place and can demonstrate the benefit in terms of the bottom line... and be prepared to move them back into the top spot if, by some fluke of fickle search behavior, it turns out #1 really is the most profitable place to be.
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