A lot of people find it hard to come up with a standard methodology for setting their bids. Personally I think there is combination of things that you can do to choose the right bids for your keywords.

Think about how much your products costs

This is one of the most important factors when selecting CPCs for your AdWords campaign.

Are you selling a product/service for £5 - £30 or is it worth over £1000 to you? Looking at it this way can help you decide what you can spend per click. If your product/service costs £5, and you have set the maximum bid as £1 then your chance of making a profit is slim to none. If your product/service costs over £1000 then it wouldn’t be much of a problem for you to £1 a click or more because you have a very large profit margin and you can spend a bit more than usual.

Think about keyword relevancy

It is really important to analyse the keywords that you are bidding on. If you sell anti-virus software and you have two keywords that you need to set a bid for “buy anti-virus software” and “compare anti-virus software” you should of course be prepared to pay more for “buy anti-virus software” because a searcher using this keyword is ready to buy.

What season are you in?

Is it your high sales season? If you’re selling gifts, it’s likely that Christmas will be a high season for you, so you will need to bid more for your keywords during this period. Rest assured that your competitors will be and if you don’t, you will be left behind.

Use the Google AdWords Traffic Estimator

This will help you get some sort of guide about roughly how much you need to bid, however do bear in mind that this is just an estimate and it doesn’t take competitors’ Click Through Rates into account. This is why I always suggest increasing these figures by at least 25%-40% to get a more accurate idea of how much you will need to pay.

Search on your keywords

This might seem either pointless or blindly obvious but it will definitely help you to get feel of how much competition there is out there and hence how much will need to pay. If you have 2-3 ads on the first page then great news you will just need to put a bit more on top of your minimum bid (shown when you’re looking at your keywords online) and you are in business, but if you have 70 page of sponsored listing then start thinking of how you are going to fund your Google AdWords campaign, because it is definitely going to cost a lot.