What is Bid Management Strategy in Google Adwards?

The most important step before bidding for any PPC program is, understanding the market value of your keywords. And best way to know it is Overture. But there are several bids going around for a keyword. So you can take an average of some top biding amount and can determine the market value of your keywords. If you can afford the market value you derive, use it. Otherwise, use your max CPC. That max CPC could be set for an entire ad group or for a specific keyword phrase.

Track the ad carefully for a few days. Assuming the bid is high enough and generates sufficient traffic, you should have a good idea of the CTR within a few days. If the CTR is good (at least 2%), lower the CPC and see where your ad falls in the search results. If the CTR is sufficient, lowering the CPC should not result in your ad dropping many positions.

Then use trial and error method with different combinations. Run a query and observe the position. Drop the bid by some amount and check the position again. Again drop it and check it. Follow the procedure until you remain in the top 3-4 or whatever desired position you want to be. If your ad's CTR is very good (better than 7%) you will likely be able to drop your CPC in half without a noticeable drop in ranking.

If your ad group has many keyword phrases and there's a divergence in CTR, consider creating multiple ad groups. The more tightly focused your ad group is, the lower your CPC will ultimately become as you weed out poorly performing keyword phrases. Adding negative keywords to each Google ad group will also help increase the CTR and thereby allow you to reduce your CPC.