That’s a question I get asked all the time.

I just answered a question in a forum on just this topic – if you’re just starting out with AdWords, hopefully this will help you too.

Here’s my response in full (you can ignore the specific references if you like!)

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Hi Nick

I would agree that tools like Market Samurai & SEMrush (spyfu is great too) are very useful for finding out the approximate ‘volume’ of keywords in your market (assuming you know which keywords to plug in in the first place!)

However what they won’t ever tell you is which keywords are profitable for YOU, given your website, your conversion rate, your copy, your USP etc.
For me everything has to start & end with profit
AdWords MUST be a positive ROI exercise

Analogy warning – great marketing should be a vending machine not a slot machine.
You should know (with some certainty) how many $$ come out for every $1 put in.
That’s our goal.

The only way to know that is to test.

You try lots of different keywords & see how they perform for you.
This is where the work comes in.
Because you want to be quite granular with those tests…
In other words if someone is searching for ‘wedding DJ in Auckland’ you want to show them an ad specifically about just that (Robert Collier wrote 60 some years ago that you want to “enter the conversation already going on in your prospects head” – so you show them a very specific ad just for that particular phrase) If they search for ‘North Shore DJ’ that’s a different ad
‘DJ for corporate event’ again, a different ad etc
Now some of those keywords will end up being profitable for you (based on the number of leads you get and the number of gigs you get from those leads – all fairly easy to measure)
Some won’t
The goal of AdWords is to move the budget away from the ones that aren’t working & spend it on those that are

So…
To finally answer your question!
The only way at the start is to test everything
If funds are limited, then make a subjective call & choose just the keywords you THINK are going to be most profitable
In fact, do everything you can to start with just the most profitable account
– only advertise in a small local area
– only use the Google search network (not search partners & not display)
– potentially start running ads from 6am til midnight (not always better, but a reasonable bet with a small budget)
– consider only showing ads monday-thursday or whatever makes sense for your market

essentially stack the deck in your favour

As for what to bid for each keyword
again the Google Keyword Planner or Market Samurai will give you an indication
BUT
there are 200+ factors that go into working out exactly how much you need to pay
not least of those is how much your competitors are paying AND (very importantly) how many people click their ads compared to yours

In other words, if more people click your ads & not theirs, you get “mates rates” & they pay more!
yep, the better you get the cheaper this gets – love it!

So writing (& TESTING) new ads all the time is critical
(you can see why such a granular approach is so much better now – if everyone sees the same ‘all things to all people’ ad, then it’s not going to get as many clicks as a very specific ad)
The amount you bid will heavily influence the position on the page your ads show
You’ll get 10-15x the amount of clicks if you show in those top 3 ads (the ones on the yellow background above the organic results)
than if you show on the right side

If funds are limited, start by aiming for position 6 (ie change bids every couple of days until you see that your average position is between 5 & 7)
If you want more leads faster, aim for position 2 (roughly 1.5 to 2.5)

It won’t be exact – nothing in this game is!
But good enough is good enough
Lastly, set your daily budget to whatever you can afford to lose.
All jokes aside – you will lose money at the start
No AdWords account is at maximum profitability from day 1

And the only way to get there is to test
Not all tests work (that’s why they’re called tests!)
So they cost money

But the cost of not testing is HUGE.
You’ll never improve
And if your competitors are improving, than standing still is akin to getting worse!

You must continue to test

Test new keywords
Test new ad copy (all the time)
Test different bids/positions
Test different campaign settings
Test adding ‘negative keywords’ (more on those another day)
Test showing on different days/times
In different locations
etc etc
This is not set & forget 🙂

Outsource well & all this will be taken care of for you.

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