Higher bid=fewer impressions
Ok, I know this is discussed elsewhere, but perhaps someone clever can clarify something for a newbie. I'm considering starting an Adword campaign having never done one before and using the keyword tool is a little confusing. I have 14 keywords under one group and put my daily budget at an arbitrary £10/day. It seems a bid of £0.03 gets the most impressions and clicks and the higher the bid the fewer impressions and clicks it predicts. I can understand less impressions, but less clicks I don't understand. And so if I increase the daily spend i get more clicks and impressions and eventually start to see a rise in clicks and impressions for an increased bid.
Is it worth paying £10 and day for around 425 clicks? If I got 5% making a purchase I'd be happy for now! In fact if I got 1% that would probably be worth it. Would I be throwing money away though? Will it only work if I spend more? I'm in a pretty specialist market so I don't think there's a huge amount of competition. Average position it reckons is 2.50 - 3.06. That's pretty good right????
Re: Higher bid=fewer impressions
Hi Mark, welcome to the Community.
Although I hate to say it, I've often found the estimates provided by the old Keyword Tool and now the new Keyword Planner to have a "variable" reliability so it's important you don't treat them as absolutes. The very best way to test clicks and CPC values is actually to run a Campaign.
I'd also say that 3p a click seems very, very low to me. It's been a long time since I've seen any CPC that low so although it's not impossible - and CPC values vary tremendously across products and services (right up above £20 per click and way more), I'd be very wary of that figure as well.
In terms of how you proceed it's important to understand the relationship between budget, Keywords and the likelihood of successful sales. It's very common to find advertisers setting small budgets on the assumption that this will save them money, while this may be true in absolute terms - you'll spend £300 a month or thereabouts - it's almost always a false economy because small budgets with multiple Keywords can mean your Ads become less effective.
Imagine a car park holding 1000 cars and you are charged 5p for each flyer you place under a windscreen wiper. We know somehow that there are 20 people in that car park who, if they receive a flyer, will read it and buy your product. If you set a budget of £10, you can put out 200 flyers but your chances of "hitting" one or more of those 20 people is much lower than if you put out 400 and, of course, if you put out 1000 you know you'll hit all 20.
When you set a budget in AdWords Google works out how often your Ad(s) can be shown such that the clicks you receive match your daily budget so. Google will know what your average CPC (cost per click) is and your CTR (click-through-rate) so, for example, if your clicks always cost 5p and your CTR is always 10%, your Ad can afford to be shown 2000 times (2000 * 10% = 200 clicks at 5p = £10). BUT say there are actually 10,000 searches per day where your Ad could have been shown. If you show your Ad to only 2000 you're in the same situation as the car park - there's a chance your Ad will be shown - and clicked - only by people who don't end up buying.
The more Keywords you have, the higher the budget needs to be to "satisfy" all the Keywords' possible impressions - the above example is effectively just one Keyword.
So, while setting a low budget will limit your spend, in most cases it also reduces your chances of sales. This is why Impression Share is such an important metric.
To test a Campaign properly, rather than spending just £10 a day with 14 Keywords (and to be honest, that may be too many in a single Group - too poorly focused) you'd do better to pick just a handful of the most likely Keywords and run a budget that satisfies close to 100% of the possible impressions for that Campaign. It may be better, for example, to spend £40 per day just for one week in a month than spend £10 every day.
One final point on this long post. It's vital that you have Conversion tracking of some kind installed and working before you spend a single penny. If you can't track your sales you've no idea of how effective AdWords is.
Re: Higher bid=fewer impressions
Lowering your bid could get you more impressions and clicks when you are limited by budget. While counterintuitive, slightly lowering your bids in campaigns that are "limited by budget" could potentially help you earn more clicks. Lowering bids for budget-constrained campaigns could reduce the average amount you pay when someone clicks your ads, with the potential for your budget to go further and get more clicks.
Read https://support.google.com/adwords/answer/2375418 for more details. Keyword Planner is simulating the same behavior, and your impression and click estimates start to go down when you spend all your budget.
Hope that helps!