How AdWords Auction Works: Marketing for Plumbers & HVAC Companies

– Hey guys, it’s me again. It’s Ryan with Digital Plumber,
hope you’re doing well. Hey, wanted to come at you
with another video this week. This is something we actually got requested on our YouTube channel. And we’ve had several people bring it up in actual conversations. Involving ad words. So your plumbing company
or your HVAC company, you’re using ad words to
try to generate more calls. But as you know, the prices that you pay can kind of go crazy, right? ‘Cause it’s all based on an auction. So you set your max clicks,
but you don’t always know how are those numbers coming out? Is Google just trying to do whatever they can do to get more money out of me? You just have a lot of questions. We thought we’d talk about how your ads, your Google ad words, are actually priced. How the auction works. And even get into things
like ad rank and quality. Because those have a deep impact. Let’s assume we don’t know … I know you’re watching this video on ad words, but let’s go back. So ad words is a pay-per-click
tool that Google has. Bing has one similar called Bing Ads, it works the exact same way. A user sets into a search bar and they type in, “Need a plumber,” or, “Air conditioner broken.” Whatever their search query is, and you can bid on your placement. And these usually show
up in the first three, or in the bottom three listings on a page. Google is always revising how many on the top and the bottom, and the side. It’s always changing, but point is, you’re bidding on the right for your ad to appear
for that search input. And you can do a lot
of parameters and say, “Hey, at certain times of
day, or certain locations, so maybe we want this
city but not this city.” You can do all that within ad words, so it’s really powerful. It’s a great way to
get good quality leads, who are needing your services. The problem that we see a
lot of people struggle with, is that they come in, they think, “Well, I need to pay as much as possible to get the phone to ring. I want those clicks
and I want to make sure I’m getting those calls
away from my competitors.” So maybe you have a
big competitor in town, and their ad is always showing. And they’re always on
the first page of Google. So, you always feel like,
“I need to compete.” What a lot of companies
do, is they waste money by starting to raise
their max cost per click, that they’re willing to pay. The problem is that’s
only costing you money, it’s not actually getting
you much better results. We’re gonna talk about the
price and how the auction works. But first, we need to talk
about two important things. One, is what Google calls your “ad rank”. This is an important way to think like Google does, like Bing does, when they’re determining
how valuable is your ad. Obviously you’re competing
for certain search terms. But so are your competitors, they’re also trying to
get those same searches. Google considers your ad rank, the price you’re willing to pay per click, plus the quality that your ad has scored. So it’s a cost per click, at times the quality score you have. Together that equals your ad rank. A high rank is better than a lower rank. Now, it’s important to keep that in mind, of how ad rank works. The second part of the equation is what we call quality scores. So if ad rank is cost per click bid, plus or times your quality score, a quality score is the
nugget to understand. Arguably it’s the most
important variable you can have when you’re doing an ad words campaign. A quality score is
measured by several things. Your click-through rate,
a keyword relevance, your landing page
experience, your ad text, and also your account history. Those five things are
all rolled into quality. So, let’s break those down just real fast. Quality score, click-through rate. Click-through rate, Google sees as, it’s the total clicks your ad gets, divided by the total impressions. So if your ad is shown to 100 people, and not one person clicks on it, it says, “Well, your ad isn’t very good. It doesn’t have a high quality.” So it’s starts lowering
your quality score. On the other hand, if you
show your ad 100 times, and 50 people click on it, Google says, “Well, holy cow. Your ad is tailored exactly for people.” It’s responding, it’s
what they’re looking for. And it starts rewarding
your quality score. Keyword relevance. If people are searching for HVAC, if they’re searching for toilet fixes, does your ad actually have those keywords to be able to make those connections? So if somebody’s looking for, “How do I fix a clogged toilet?” And your ad talks about, “Hey, we do water heaters.” There’s gonna be a low keyword relevance, they’re not the same. The trick is to try to say, okay if they’re looking for, “I need a clogged toilet being fixed,” your ad should say something
about fixing clogged toilets. You want those keywords to line up. Landing page experience is the next … So click-through rate, keyword relevance, landing page experience. Landing page is basically
when you take someone … Once they click on your ad,
where do you drop them off? If they’re clicking on
“my toilet’s clogged”, and they click on your ad, and you take them to a water heater page, it’s not helpful, it’s gonna
have a low quality score. So they’re gonna land
there, and they’re gonna go, “Well, I don’t need anything
to do with my water heater.” And they’re gonna leave your site. So Google does analyze not only the ad, but the destination
you’re sending them to. So because of that, we always say, “Hey, don’t just send
them to your home page.” If your website is Joe’s Plumbing dotcom, don’t drop them off there. Try to drop them off somewhere where it’s closer to the
problem that they have. And we’ve talked about how to optimize those tricks in other ad videos. Ad text. So we wanna know that specifically are the words that you’re
saying in the ad … Are they good, are they
getting conversions? And account history. Do you have a history
with your ad campaign? Of getting good clicks,
of getting good quality. Historically, what do people do? Because of that, sometimes
it’s important to … At the beginning, if you never set up an ad words campaign,
sometimes it’s important to actually start with a higher bid, to start getting some traction. So you can start getting
some account history. So that you can start raising
your click-through rate, you can start learning a
refining your keyword relevance, and modifying your landing
pages to be better. You can start going through this process to increase your quality score. That’s the whole point of this, right? Is increase quality score so
that you can have some history. And then over time you
can start lowering now, your cost per click
you’re willing to spend. That’s the quality core. So remember, ad rank is determined by the price you’re willing to pay, times your quality score. Now, we mentioned that your competitors are also competing for the same words. What does that mean for you? Okay, we know ad rank is, now we know how quality
score’s determined. How does the price that I
pay actually get determined? (coughs) Excuse me, I’ve been sick. This is a cute little
graph that you can look at. Take a screen shot if you want. It talks about how these
things are determined. You can see it breaks down
into how Google does this. Your price, the price that you actually ultimately pay for a given click, is equal to the ad rank
of the person below you. Not your ad rank, but
the person below you. Divided by your quality score, so we want this score to be high, right? And then plus a penny. It’s always plus a penny. Ad rank and person below you, divided by your quality
score, plus a penny. And that determines your actual price. Now here’s where this plays out. If you look at this chart here. This advertiser is throwing more money, they’re throwing $8 a click, right? So they’re doing what a lot of people do, they’re trying to throw a lot of money. Some of you might be throwing
$20 a click, or $50 a click. This number’s kind of irrelevant. But the point is, you’re throwing more money at this problem. But, because you have a low quality score, you only have one star as opposed to a 10. Your ad rank is low. And because your ad rank is low, it means that not only are you paying more for the click, but you’re likely not gonna get shown to begin with. But let’s take this up to
the winning advertiser. So this guy, he’s only bidding $2 a click. But, because his quality
score is strong … So we’re saying, ad
rank is cost per click, times your quality. His ad rank trumps everyone else’s. Where this guy’s the cost per click, times the quality,
doesn’t get him very far. In order to win this, if your competitor has an ad rank of 40 or 50, if you have a one star quality score, your bid is gonna be
$40 or $50 to compete. On the other hand, this
number can be much much lower if you max out your quality score, you can do a minimum
bid to actually compete, to get the most ad rank. This is the one that
Google’s gonna pool, right? That actual click, comes down to only $1.61 in this category. Because again, think of the math. The math is, it’s the ad rank of the person below you, so 16. Divided by your quality score, 10. Plus a penny, which gets you your $1.61. It’s important to keep this in mind. It is really easy to waste a
lot of money with ad words. You can throw a lot of money at it, and see very little results. Or, if you tweak it and you refine it, and you spend some time, and you study how to best optimize your ad, you can get very
inexpensive leads coming in. Without spending any more money. In fact, you can spend less money than your competitor spent,
because you’re focused on the quality that your
customers are experiencing. Both not only in person, with the service, but also with the ad and
the website presentation. So, if you have questions about how that means for your business … If you want us to look
at what you’re doing, if you have questions you
want to throw at us about, “What about if we’re
trying to do x, y, or z?” We’d love to be able to talk to you and see if we can’t help you out. You can always reach out to us at We always love talking to companies just like you, to figure that out. And, if you have any questions, you have any comments,
if there’s something else you’d really like to talk about, let us know in the comments below. We always like to see what you guys are dealing with, what you
think about the videos. And we wanna give you as much content that’s useful to you as possible. So, if you don’t yet,
go ahead and subscribe to our YouTube channel. Like us on Facebook. We’re always trying to
give more information you could just take, you could
apply, you could understand. And use it to start making
more money for your business. Hope you’re doing well. Hope this video was helpful. And hopefully you can
take this information and start increasing your ad rank, increasing your ad quality. And start paying less per click, knowing how the actual ad
words auction’s determined. So, that’s it. Guys, have a great week. And we’ll talk to you next time.


Great educational information I like people other than sale just the product educate others with the information provided.

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