You probably mean what is the relation between the Avg. Position and the CVR (conversion rate) - and if a better position (closer to 1) brings a higher CVR.
This depends very much on the country and industry you are advertising.
I think it depends a lot on your industry, market, etc.
A lot also depends on your inventory level, product breadth, etc.
Number of impressions won't necessarily go up, unless you were appearing on page 2+.
I think the biggest affect the bid increase will have is that your clicks will cost more...if your inventory is good and the keywords you're bidding on are relevant, you could see an increase in the number of conversions. The question you need to consider is whether or not it's worth the extra money to gain position over someone else. If your ads are displaying with others that are totally unrelated to your product, there's no sense in out-bidding them.
Thanks for your replies.
I have currently doubled the amount i am bidding on each keyword - and goin to record what happens. There may be an arguement to say that the further down the list you are the higher your conversion rate will be - due to the fact that people are specifically looking for a product / service and are searching down the list for exactly what they want - instead of clicking the top one?
That can happen. I have some clients who do much better in positions 3-5 than they do in 1-2 (and pay a lot less) I believe that more and more people scan the entire list of ads before deciding on which one to click; I know I do.
Emphasis on the word scan - you want to make sure your ad stands out in some way. So take a look at what your competition is writing, and make sure your ad title REALLY stands out. And you also want to make sure the rest of your text is really focused on what you're offering. If I'm looking for something specific, I'm much more likely to click on the specific ad that mentions what I'm looking for (and has an ad that relates well to it - as opposed to one using dynamic keyword insertion for anything that gets typed into the search box)
"There may be an arguement to say that the further down the list you are the higher your conversion rate will be"
This can be affected by a lot of different factors including products, pricing, competition etc but it is certainly true that the top spots are not always the best. You will find you get a lot more traffic in a higher spot but there are many factors determining how much of that traffic will convert on your site. .
I have always found it best to experiment with ad positioning to find the point where you can retain the highest level of traffic but whilst maintaining good conversion rates and ROI.
It is true the higher positions will bring in higher traffic but it depends on how much of this traffic converts as to whether it is the best position for your ad. For example you may find the term you are bidding on is used a lot for research purposes and so you may find lower conversion rates e.g. users just browsing or visiting the top 3 ads to compare offerings. Unless the 1st site offers some kind of incentive (e.g. exclusive product, better service, better pricing etc) for the user to return to them after comparing other sites then the user is likely to purchase from the last site they visit which means the top spot ad is likely to see lower conversion levels.
Sometimes it is better to go for a lower ad position to as at this point users maybe closer to actually making the purchase as they have already compared other sites and so although traffic levels are likely to be lower, the conversion rate is likely to be higher as more of the non buying users will have already been filtered out of the traffic e.g. people who are just browsing.
If you're using Google Analytics and have your AdWords campaigns linked to it, it'll actually tell you in which positions you're doing the best.
History has told me that lower position will usually result in higher conversion rates. The question is 'what is the optimal position' and that depends on the individual keyword. For me, I test bids in each position then base my decision on 2 metrics: conversions and CPA. Here is an example (assume the same # of impressions at each position and each conversion to be worth the same value):
Position 1: 100 conversions @ $100 CPA
Position 2: 80 conversions @ $75 CPA
Position 3: 70 conversions @ $65 CPA
Position 4: 55 conversions @ $50 CPA
Position 5: 45 conversions @ $45 CPA
Position 6: 40 conversions @ $30 CPA
So what is the optimal position? Well, it depends on how much each conversion is worth to you. If each conversion is worth $50 then position 6 is going to be the most profitable. If each conversion is woth $300, then position #1 is going to be most profitable. Chances are if you are testing for these positions though it falls somewhere in between $50 and $300. The key is to find the sweet spot that is most profitable for each keyword.
You might want to look at some of the heat map research that is out there. Ads in higher positions tend to get more clicks. Once you get past a certain ad position (generally 4 from what I've seen), clicks taper off dramatically. Definitely test different bids and positions.
Also, remember to test different ads. Often times I will keep an ad that has a better CTR even though it has a slightly lower conversion rate since it is still returning a positive ROI.
I dropped down an average of 5 positions after the last QS/top placement formula update and the conversions are much worse..
You could have different results but that's what happened to me in Germany..