Why bid over £20
The first point to note is that
this is the wrong question to be asking.
Why shouldn't someone pay over £20 a click if
they are making money?
Suppose you sell Airbus A380s
and Boeing 747s. How much is a decent sales lead worth to
you? It's got to be millions. And if it takes 2000 clicks at
£20 to get a decent lead and costs you £40,000 it is
probably a bargain.
Sure, if you can get leads for less than £20 a
click that's even better but the key point is that the price
you pay per click is not the key measure of how an AdWords
campaign is going. What really matters is the visitor value
of your traffic and whether that is significantly more than
your average cost per click figure. Once you have
achieved that position you definitely want to try and reduce
your click costs but quite possibly not if doing so will
reduce your traffic volumes.
Let's take a more down to earth example.
Suppose you sell a financial services product that makes you
£500 a sale and that you convert 20% of all visitors to your
site. In other words, your visitor value is £100.
If you bid (and let's assume you also actually
pay) £20 a click, you'll be making a profit of £80 a go. You
could then reduce your bid prices, say to £15 a click which
will increase your profit per visitor to £85.
But in such a competitive environment dropping
your bid that much could well knock you down from 1st
position to 6th or even onto page 2. And then you overall
profit would be much, much smaller because you would have
few leads to work with.
So always focus on profitability, not ROI nor click costs.