Is changing bids (max CPC) for keywords the answer to reducing your cost/sale or CPA? The answer is no. Getting sales/conversions through AdWords or any SEM campaign is a three step process and changing bids for your keywords only helps with the first step.
Step 1: The search
A user types in a search query. Google matches the query with a keyword in your AdWords account and triggers your ad. The bid (along with other factors) decides which position your ad will show. The role of your keyword bid ends here.
Step 2: The click
Your ad is showing in the top position. Is your ad text relevant enough to your keyword? Will it compel the user to click on it? An optimized bid may get your ad ranked high but if your ad text is not good the user won’t click on it. One of the best ways to make your ad text relevant is to feature your keyword in it. Also, mention other USPs like free shipping, price points etc.
Step 3: The conversion
You get the click and the user is on your site! But it doesn’t end here. Does your landing page offer what the ad text promised? If your ad text promoted black shoes and the landing page leads to talks about a black dress, the user will probably just close the page. Unfortunately or fortunately, users want instant gratification. The landing page does offer what your ad text promised. How easy is it for a user to buy your product or, convert? How many steps does it take to get to your thank you page? Is your sign-up process too long?
To increase sales/conversions and to reduce CPA (cost/conversion), each of the above steps is important and changing bids only helps in the first step. This is why just changing bids or, using an automated bid management system that only changes bids, is not the solution. Next time someone tells you they can reduce the cost/sale for your SEM campaigns by just changing bids for your keywords, think again.