Unless you are bidding on very high volume exact match keywords, you are very likely losing out on a ton of volume.
You should typically start campaigns with broad match or modified broad, add a shiton of negs, and then isolate your best keywords moving forward.
As others have said, send your traffic to the appropriate landing pages. Sending your traffic to the homepage is a disaster.
Your competitor is an idiot.
Your qs is suffering in part BECAUSE you are sending all of your traffic to the homepage.
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This is already a very targeted campaign targeting a specific manufacturer and product.
As far as I can determine, my competitor puts a redirect url into his ads, which then redirect to his homepage.
Example:
Blue Diapers!
Free Shipping!
www.mysite.com/blue-diapers
...where mysite.com/blue-diapers redirects to mysite.com
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He might be an idiot, but he's been dropping $X,XXX a month for at least a year and he's at #1 or #2 for his PPC keywords, so he's clearly generating some profit.
There are only 22 keywords in this campaign. Only 4 or 5 of them have any significant traffic.
I realize that the CTR is horrendous and that I should be aiming for 1 or 2%.
As high as I'm bidding, however, Google keeps my Avg. POS at 4 or higher.
There was a brief stretch where the Avg. POS declined from 6, down to 5, down to 4, then the momentum changed and it started a slow climb all the way from 4.7 to 6.3 over the course of a couple days, etc... At that point, I paused the campaign.
I think that my atrocious QS is a combination of my low CTR and my landing page relevance.
The main reason I paused the campaign, however, is because the CRE Loaded template I'm using has made it very difficult for me to install proper tracking.
So I will be destroying the entire site, building a Magento site from scratch, and restarting the entire campaign branching out to broad match as well. I briefly looked at Shopify, but they don't even give you a decent design for the monthly fee and transaction fee they're taking, so there's no shot of that happening.
Hopefully it goes a little better, although I know Google can punish new campaigns based on the performances of old ones.
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These was the final stats for this short-lived and doomed campaign:
Imp: 4,667
Clicks: 6
CTR: .13%
Avg. POS: 5.4