Bidding on specific or niche keywords can slow campaign spending while improving conversion rates, according to Yahoo!.

A “best of” post on the Yahoo! Search Marketing Blog by the company’s Smart Start Team said there are three key stages to the purchasing process and potential customers want different things and will use different searches in each one.

Understanding these phases and adjusting pay per click services to reflect consumers’ needs is essential in boosting conversions, it added.

In the first stage, the research phase, users are looking for general information about products and will use broad terms like ‘television’ or ‘camera’.

During the shopping phase, they start to narrow their purchasing options and start to use more detailed phrases such as ‘plasma television’ or ‘digital camera’.

In the final phase, customers are ready to buy and have very specific ideas about what they want, which will be reflected in the use of specific keywords like ’42” plasma TV’ or ‘eight megapixel digital camera’.

Bidding on these more niche terms could therefore be more effective because it will target ads at consumers who are already geared up to make a purchase, the blog noted.

In related news, Yahoo! recently announced that under its new partnership with Microsoft, some keywords will be outlawed or restricted in ads.

They include terms linked to hard liquor, “educational” gambling sites and fundraising aimed at users.

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