Ever wonder exactly how Google calculates the cost for each click on your Google PPC adverts? Common belief by many people is that it's simply a case of 'The more you bid for a click on a key phrase, then the higher you get listed', in much the same was as an auction where the winner is he who pays most. Not the case with Google!
Google's method is a mix of criteria (including what you're willing to pay): (a) The quality of the advert text, and its relevance to what people are searching for, (b) The quality of the actual landing page your advert links to - in terms of its relevance, speed of the page, content user friendliness etc., (c) The bounce rate from your site, i.e. whether people click back off your site straight away after landing on it, plus the length of time they spend on your site, all related back to (b).
Google's Quality Score is a key factor in its calculations, which they define as:
“Quality Score is the basis for measuring the quality and relevance of your ads and determining your minimum CPC bid for Google and the search network. This score is determined by your keyword’s click through rate (CTR) on Google, and the relevance of your ad text, keyword, and landing page.”
Google have an excellent video below from their Chief Economist, Hal Varian, on how Quality effects bid costs. Once you understand their quality methods, then it's easier to go looking at how improvements can be made to the quality of your Google Ads and your landing pages in order to improve advert costs and RoI.