Improve your return

Budget and bid optimization isn’t necessarily about spending more -- it’s about spending strategically. A critical first step is understanding the relationship between cost and quality. Then you can track your return-on-investment, experiment with your budgets and bids to see what’s working, and use performance data to help you determine where your dollars will make the most impact.

Understand the relationship between cost and quality

Before you consider optimizing your budget or bids, you should make sure you understand how a good Quality Score can enhance any spending strategy. All things being equal, the higher a keyword's Quality Score, the lower the price you pay for each click (called your actual cost-per-click) and the better your ad position.

Improved Quality Scores can impact your spend in several ways:

  • High-quality keywords generally cost less for each click.
  • High-quality ads can show in a better position without costing more.
  • More clicks can fit within your set budget, allowing your ad to show more often.

For ads and keywords that aren’t performing well, sometimes a quality-related change will have more impact than a spend-related change. Focus on improving your Quality Score by optimizing your campaign -- making sure, for example, that your keywords and ads are specific and relevant to your products and services -- and subsequently improving factors like click-through rate (CTR) and landing page experience. By optimizing for quality, you can help alleviate budget and bid issues and potentially reduce your costs.

Track your return-on-investment (ROI)

When you invest money in an ad campaign, you expect to gain back that amount and more. It's crucial that you understand what you can gain from the money you spend on advertising. If you intend to make a profit, take the time to analyze and track the campaigns you run and the return you get. Note that it's generally your bids, and not your budget, that directly impacts your ROI.

The bottom line for any ad or keyword is how much value it generates compared to its cost. To determine the profitability of a keyword, you can track the conversions from that keyword with one of these free tools:

Conversion Tracking: Use conversion tracking to determine the profitability of a keyword or ad. Easily track your conversion rates and cost-per-conversions. The cost for each conversion should be less than the amount you receive for that conversion. For example, if you receive $10 dollars for each sale but spend $11 on clicks to get that sale, you may want to consider optimizing to improve your ROI.

Google Analytics: Use Google Analytics for a more advanced ROI analysis. In addition to basic conversion tracking, Analytics also offers advanced conversion reports and conversion funnel analysis. Once you have conversion data, you can identify unprofitable ads and keywords to optimize or remove.

Adjust your keywords for better ROI

With conversion data, you can see how profitable your keywords are with their current bids, and then identify which keywords could be more successful with adjusted bids.

For keywords that show a profit (such as having high conversion rates and low costs): You might try increasing their maximum cost-per-click (CPC) bids. While costs may increase, your ad position could rise and provide more ad exposure, potentially increasing your conversion volume and your total return. In other cases, it may make sense to lower the bid for a keyword even if the keyword is profitable. By lowering the bid, you'll lower the average amount paid and your volume will likely decrease, but you may increase the profit margin for that keyword.

For keywords that aren't profitable (such as having a low conversion rate and high costs): You might try decreasing their bids to lower your costs. A lower bid is likely to decrease a keyword's average CPC, average position, the number of impressions and clicks it receives, and as a result, the cost it incurs. Not only can this strategy improve your ROI on low-performing keywords, but in some cases, it can also free up part of your budget to invest in more valuable keywords.

Use Conversion Optimizer to get more conversions at lower cost

You set the maximum CPA (the maximum you're willing to pay for a sale or lead) and the Conversion Optimizer tool adjusts your CPC bids to get you as many profitable clicks as possible. Here are some of the tool's key benefits:

  • Increases ROI: Conversion Optimizer help predict, in real-time, which clicks are likely to lead to a conversion and aims to spend on clicks that are profitable. You can minimize unprofitable spend and maximize your investment on keywords that produce results.
  • Saves time: Conversion Optimizer automatically adjusts CPC bids in each ad auction, on both Search and Display Networks, to optimize your ROI. This frees up your time to focus on more strategic efforts, such as optimizing campaigns or analyzing your website's effectiveness.
  • It's free: Other bid management tools can be expensive, with monthly fees. Conversion Optimizer is free to use with AdWords and easy to set up. Just navigate to the bidding options page of your campaign, choose your maximum CPA, and enable the feature.

Note

To use Conversion Optimizer, you must have set up conversion tracking and have received at least 15 conversions in the last 30 days.

Experiment with bids and budgets to see what works

Test different bid amounts and budgets and measure how effective the change is -- test bids for profitability and ROI, and test budgets for ad exposure.

We suggest adjusting amounts in small increments to allow your keywords to accrue conversion statistics and performance data with the new settings. Allow at least a few days between changes so you'll have enough performance data to make an informed evaluation. In addition, your daily costs, profits, and sales might rise and fall with regular fluctuations in search volume. Therefore, you'll want to re-evaluate these amounts regularly to make sure your campaigns are continually effective.

Tip

Learn about setting bid adjustments to gain more control over when and where your ad is shown.

Through testing and measuring, you should be able find the ideal range where you're most effectively reaching your advertising goals.

Allocate your budget according to performance

An important aspect of budgeting is making sure you have appropriate budgets for each campaign.

  • For keywords that are profitable, you probably want to show them all the time. To do this, the campaign's budget needs to be sufficiently high so the campaign is not limited by budget.
  • If you'd like certain keywords to receive maximum traffic, make sure they're in campaigns where daily spend isn't reaching or exceeding the campaign's daily budget consistently.
  • If your campaign often meets its budget, there's a chance that only your high-traffic keywords will trigger your ads, overshadowing other keywords that might turn out to be more profitable.

Try to prioritize your products or services and then match budgets to each campaign based on priority.

  • If your overall advertising budget is limited, find budget from campaigns that have unused budget or that don't convert well, then reallocate that budget to high performing campaigns that are limited by budget.
  • If a campaign isn't limited by budget (isn't consistently meeting its budget), then allocating more budget to it will have little or no effect on that campaign.

Additional tips

Use ad scheduling to automatically change your bids throughout the day

Tool: Ad scheduling includes an advanced setting that lets you adjust the bids of your ads during certain time periods. Use the bid adjustment feature of ad scheduling to automatically take these actions:

  • Increase your CPC bids by a certain percentage on days or times of day that are most profitable for you. For example, if you find that your ads get the best results before noon, you can set your bids higher during that timeframe to try and get more impressions and clicks.
  • Decrease your CPC bids on days or times of day when appearing in a high position doesn't result in profitable clicks.

For example, you can choose to raise your CPC by 50% (therefore selecting 150% in the bid box) between 9 a.m. and 5 p.m. if you know this is the peak period when users you target search for your product and tend to convert. Then decrease by 30% (selecting 70% in the bid box) between 5 p.m. and 8 p.m. if you notice that traffic or ROI dips during this period.

Note

Use data from your AdWords reports, conversion tracking, and Conversion Optimizer to help you make more informed bidding choices if you choose to use advanced ad scheduling.

Plan for seasonal spend fluctuations

If your product or service is likely to be affected by seasonality, take this into consideration when allocating budget between your AdWords campaigns. Anticipate demand for your business at certain times of the year so you can increase or decrease your campaigns' budgets according to when your campaigns are most profitable.

For example, if you sell chocolates, you may experience increased ad traffic and sales around celebrations or holidays such as Valentine's Day, Easter, or Mother's Day. Local and national holidays or events can also affect visitors' search habits. Make sure you have sufficient budget in your campaigns during those times to help capture all the traffic available to you and prevent other advertisers from gaining the clicks you missed due to budget.

Tool: If you're not familiar with seasonal trends related to your industry, you can use Google's Insights for Search

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