The importance of bid management and bid adjustments is to make sure you are not overpaying for conversions. You might be able to pay less for a conversion and get more conversions if you’re managing your bids correctly.
There are several ways you can edit your bids in Google AdWords, depending on the type of bidding you choose. You can change the bid for specific keywords or placements that are working well for you, the default bid that is used for all components in your ad group, or special bids, like the amount you would pay for clicks on the Search or Display Network.
Editing a bid for an entire ad group
The Max CPC (default bid) allows you to set a single bid amount for all of your keywords, audiences, or placement within your ad group.
Editing a bid for individual keywords
When you bid at the keyword level, it supersedes all other default bids.
Bidding in Enhanced Campaigns
Allows you to increase or decrease any groupings of bids by a percentage. See Enhanced Campaigns for more info.
If your ads are in position one or two, it will typically cost you more than if that same ad were in position three. If you find that many of your ads are in position five or higher, increasing your bid may help you achieve a higher CTR, since your ad will have a better opportunity to be noticed by searchers. Also, if your ad is in position one, you may often be able to achieve the same CTR in position three with a lower CPC. These are two examples of times you might want to adjust your bids.
Managing Your CPA
Many search engine marketing managers aren’t aware of the impact conversion rate has on the target cost per acquisition (CPA). Take our client, CollegeBookRenter.com, for example:
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The target CPA for CollegeBookRenter.com is $30. Keep in mind that the more general the key term, the lower your conversion rate will be. Conversely, the more targeted your key term, the higher your conversion rate will be.
In the example above, note that the cost-per-click (CPC) is the same – the only variable is the conversion rate (calculated by dividing conversions by visits). Since CPA is calculated by dividing traffic costs by conversions, your CPA will change as your conversion rate changes. To control your CPA so that you aren’t spending above your target rate (or not spending enough on quality key terms), you should adjust your bids as your conversion rates change. The general key term “College Textbooks” has a 1% conversion rate, causing it to surpass the target CPA by more than double. To lower your CPA, you need to down bid the CPC for this key term; lowering it to $0.60 will lower the CPA to $30.00, your target CPA. Following this example, you can also increase your bid on the key term “Rent Textbooks” to $1.75, which will raise your CPA to $29.17 (still below your target CPA), but will also improve the position of your ad in the search engine results page (SERP).
How Keyword Match Types Can Impact Your CPA
For the following example, we will use our customer, AutoMobilitySales.com, a company that sells wheelchair vans. If you have the key term “wheelchair vans” in either broad, BMM, or phrase match ad groups, your ad can show when someone types “wheelchair van taxi” or “wheelchair van drivers wanted,” search terms that are irrelevant to AutoMobilitySales.com’s business. Since this traffic is not directly targeted, it will decrease your conversion rate, which in turn will increase your CPA.
How Display Network Can Impact Your CPA
Using the same example from above, if you use the term “wheelchair van” in the Display Network and you are running automatic placements, your ad can land on a webpage about government assistance for wheelchair vans:
This page is not as relevant to AutoMobilitySales.com, which is a website about wheelchair vans for sale. If a potential customer intends to buy a wheelchair van, it would be far better to have a placement on a site like MobilityVanSales.com:
How Ads & CTR Can Impact CPA
It’s important to know that your goal is not to get as many clicks on your ad as possible but to get as many qualified clicks as possible. Pre-qualifying people before they click on your ad will weed out questionable traffic and attract more relevant traffic. In the following example, pretend you are managing the PPC account for a travel company. If you are selling vacation rentals in Miami and someone searches for “Miami condos,” they could be looking for condos to purchase or vacation rentals. To weed out those searching for condos to purchase, add a pre-qualifier in your ad copy. A good example would be to mention your weekly rates – “Miami Condos from $700/Week!”
When you pre-qualify people before they click on your ad, you may often find that your click-through rate (CTR) will drop. However, you will also notice that your conversion rate will increase, which will in turn increase your CPA. You should practice this whenever possible to avoid paying for empty clicks.
How Ad Relevancy Can Impact CPA
Just because your ad is relevant to a given search query, doesn’t mean that it’s relevant to the product or service you are selling. The more relevant your ad is to someone searching for a given query, the more likely it is that they will convert.
Pre-qualifying is a great way to make your ad more relevant. However, you should focus this effort only on keywords that are less targeted. Using the CollegeBookRenter.com example, if your key term is “College Textbooks” you should add “Rent College Textbooks” in your ad copy as a pre-qualifier to weed out people looking to sell a college textbook.
The Dangers of Using Bid Management Software
Although bid management programs can make PPC managers’ lives easier by automatically controlling bids, several different factors can impede the systems’ ability to effectively and accurately do its job. The following are some noteworthy issues we’ve encountered when running bid management software.
- If the program breaks, it could cost hundreds of thousands of dollars. For example, if a system is running a product update, the programmers neglected to account for zero conversions and you have a rule in place that decreases bids when there are no conversions, your bid would remain the same. When we encountered this problem, our CPC figures were incorrectly inflated by 20%. Because this AdWords account was spending over $1,000,000 per month, it resulted in the company losing over $200,000 by not bidding down poor-performing keywords.
- Bid management software needs large amounts of data to work correctly. To discover whether or not a keyword or key phrase is good or bad, you only need about 200 clicks to make a valid decision. For example, you might have an AdWords account that has hundreds of thousands of keywords, and only 5 that generate over 100 clicks in a given month. This makes it difficult to make the best, most educated decisions about your keywords or key phrases.
- The decisions you make about ads within closely-related ad groups should be made at the ad group level. Currently, no bidding software exists that works at this level.
- Bid management software is reactive, not proactive. Bidding software tools will not lower bids until after a hurdle has been identified. For example, if you were marketing hotels in Orlando, Florida, and were experiencing an inventory shortage, bids should be lowered manually. Bid management software would not pull these bids back until after its bid rules found a conversion or ROI problem. This problem can also happen in the opposite situation – if you know you have a great deal, your conversion rate and ROI could spike and it could take the bid management software weeks or months to respond.
Bidding can be tricky. Call our team if you have any questions at (954) 606-5359, and keep reading to learn about Landing Pages.