The quote below is based on a real support email that we recently received, and describes a situation we see with some frequency. Since we started with an actual email (as opposed to a public post in our AdWords Help community forum, which we often quote here), we've edited the example to simplify and remove any identifiable information. However, the situation discussed here is quite real -- and well worth avoiding.
I recently started a new Ad Group, running on the keyword 'flower delivery'. When I started, I had a Maximum CPC of $1.00 which was fine - but then I decided to try to improve my position, and raised my Max CPC way up to $5.00 to make it happen. In the past, I've increased bid amounts on other keywords, with the average CPC falling far below the top bid amount. I would have never increased it to $5.00 if I knew that each click could actually cost me that amount. Since I last checked, there have been a lot of clicks at $5.00! I'd be happy to pay $1.00 to $1.50 per click, but not $5.00. What happened, and what can I do?
It's important for advertisers to know that AdWords is an automated system which is designed to take advertiser input, and act on it in a literal way, rather than interpret what an advertiser "really wanted". In other words, when an advertiser specifies what they want, the system does its best to give them just that.
Thus, when an advertiser specifies a Maximum CPC, the AdWords system will assume that the advertiser means it, and in fact wishes to pay up to (but not more than) the specified Maximum CPC -- in order to be as competitive as possible. And, while it is true that one's actual CPC may often be far less than the Maximum CPC set, in a very competitive (and ever-changing) landscape it remains possible that clicks can in fact cost the maximum amount specified.
Bottom line, to avoid this particular pitfall, it's always advisable to set your Max CPC no higher than you are actually comfortable paying for a single click. Likewise, the same principle applies to your Daily Budget setting. We would not advise setting your daily budget to an amount higher than you're actually comfortable paying per day, even if you believe doing so might "force" the ad to show more often over the course of the 24 hour day.
