When you’re advertising on Google AdWords and just starting out it is really easy to fall into the trap of overestimating your conversion rate.
Your conversion rate is basically this: Out of everyone who came to your site, how many people made a sale? If a hundred people come to your site and one person makes a purchase, your conversion rate is 1%.
A lot of your bidding is ultimately going to be based on your conversion rate. If you’re just starting out, the tendency is to overestimate what your conversion rate is actually going to be. You probably have a higher opinion of your product – I’m sorry to say – than most people do.
So when you’re looking at starting out and setting a budget and setting your bids based on what you think your conversion rate is going to be, it’s best to scale this back. If you think your conversion rate is going to be 10%, you might want to scale that back to 2% maybe 1%. If once you start out your conversion rate really is 10% – great. Now you can adjust your bids and things will be even better than when you started.
If you try to start based on overestimated conversion rate basically what you’re going to do is blow a bunch of your budget right away, waste a bunch of money overpaying for clicks, and is not going to be good. It is going to be a lot harder for you to scale back because you’ll get frustrated and you might not have that much money left over.
Start small so you can make your numbers work based on a low predictive conversion rate, and you’ll have a really good shot at being successful on AdWords.