Can anybody help here as I am considering the use of a bid management tool, and i want to see if the sales speil i got is correct in whether its goin to save me money on adwords, and most importantly, how?
Bid management system? Do you mean Bid Optimizer? My advice would be not to use it. It is new and seems to have a few kinks in it still based on what is said here.
You'll probably do better to ask less general (teach me) questions. People like to help but probably don't have the time necessary to explain all the ins and outs of basic functions.
Actual CPC's are determined by CTR and ranking. What BO (budget Optimizer) supposedly does is change your bids to maximize clicks based on your words and search traffic and (I suppose, this is pure supposition) how those words performed for other advertisers in similar markets with similarly worded ads.
2 Problems with that. CTR is not a good measure (for us) of success, ROI is. So optimizing on CTR IMHO misses the mark. (I can instantly get lots of non-relevant traffic: "Look Here Free stuff-sex sex sex") And secondly BO uses Google's Estimated Bid "machine" (the actual name escapes me) to, in part, base its decisions on. I don't remember the things name because I never use it because the few times that I did it was never, never, never even the slightest bit close to reality. ( I think the I-Ching might do better!)