Adjusting bids to maximize profits: Google Best Practices

Concerns and considerations


 

At the end of the day, all advertisers want to get to the same place: maximum profits. Since no two advertisers are exactly alike, there are bound to be different paths for everyone.

As you make a bid for higher profits, some questions and concerns may come up. In this part of our paper, we’ll look at some common concerns and show you how to address them.

 

Organizing your account

Concern: Some parts of my account earn much more profit than others — but they’re scattered across various levels.

Strategy: Group similarly profitable parts of your account together into “portfolios.”

Cluster the parts that have similar profit values (like high lifetime revenue or gross margins) into “portfolios.” That makes it easy to access similar-performing pieces across your account. This can be done by product line, for example.

Tip

Use Google Ads labels to easily organize similar parts of a portfolio for reporting and bidding.

 

Concern: Exporting data from Google Ads to calculate profit and bids is cumbersome while also risking manual error.

Strategy: Feed total profit values directly into Google Ads.

Try tracking profits directly in Google Ads instead. Assign values to your conversions through conversion tracking, or include those values when importing conversion data. Remember to factor in key assumptions such as lifetime value, value from all conversions (on and off the web), and word-of-mouth referral value.

 

Testing bids

Concern: I don’t feel comfortable testing at the account or campaign level. I’d rather test at a smaller scale first.

Strategy: Weigh the benefits of testing at a broader level against the costs of doing so too granularly.

You may gain control by testing individual keywords at a time, but you lose out on visibility and speed.

Remember, testing at the account level can give you a better sense of how bidding up in one part of your account can create benefits for another. It can also uncover profit opportunities that may be dispersed across your entire account.

The Bid Simulator can also help you choose which high-volume keywords in your account to test and how much of a bid increase to try. To find the most promising keywords in your account, sort by the Est. Add. Clicks/Week (+50% bid) column. This forecasts the incremental volume of each keyword if you raised its bid by 50%. Keep in mind that the simulator doesn’t account for potential effects across campaigns. For example, it doesn’t estimate incremental impact on brand terms from increasing bids on generic terms — keywords that are typically located in separate campaigns.

Keywords Cost/conversion Conversion rate View-through conv. Labels Search Exact match IS Est. add. clicks/wk (+50% bid)
  $4.87 10.15% 26,975 -- 35.09%  
treasure map $69.21 7.65% 0 -- 98.48% 367
digging shovel $88.74 5.22% 0 -- 98.67% 168
eye patch $95.15 4.28% 0 -- 96.76% 151
metal detector $0.00 0.00% 0 -- 58.50% 148

 

Tip

If testing at the keyword level, focus your efforts on high volume keywords with low top of page rate. Remember to monitor the bids on other match types. For example, while testing an exact match for the keyword metal detectors, don’t raise your bids on its broad-match version; that could cannibalize traffic and interfere with test results.

 

Concern: A 20–30% bid increase may not be suitable for my account. How can I identify a more customized bid increase?

Strategy: Use the Bid Simulator to see how different bid changes can yield different conversion volumes.

Pick a bid increase that’s expected to create noticeable effects in your traffic volume.

 
Max. CPC Simulated Budget Clicks Cost Impr. Top Impr. Converted Clicks Conv. Total conv. value
+300% $10,000.00/day 6,580 $33,270.98 421,000 121,000 150 322 9,440
+200% $10,000.00/day 6,430 $31,308.97 403,000 105,000 148 318 9,360
+100% $10,000.00/day 6,070 $28,796.84 369,000 82,000 143 306 9,2000
+50% $10,000.00/day 5,590 $25,820.14 328,000 64,200 136 291 8,950
+25% $10,000.00/day 4,830 $21,123.05 293,000 50,200 118 253 7,960
+10% $10,000.00/day 4,070 $16,428.07 266,000 38,900 100 211 6,760
0% (current) $10,000.00/day 3,500 $12,883.49 249,000 32,100 85 180 5,880
-10% $10,000.00/day 2,910 $9,259.26 230,000 25,5000 70 147 4,690
-25% $10,000.00/day 2,310 $6,099.80 204,000 18,200 56 117 3,770
-50% $10,000.00/day 1,420 $2,632.99 152,000 7,630 37 78 2,650

Estimated impact for Week: Aug 18, 2014 - Aug 24, 2014. These estimates don't guarantee similar results in the future.

 

In this chart, increasing bids by +25% will increase your clicks much more noticeably (+38%) than increasing bids by only +10%.

Concern: My business is too seasonal for me to study the effects before and after a bid change.

Strategy: Use Google Ads Campaign Experiments to control for seasonality by comparing how different bids perform in auctions over the same timeframe.

Set up a Google Ads Campaign Experiment to test how the bid changes affect your performance. Don’t forget to end the experiment once you’ve gathered enough data.

 

Managing bids

Concern: My profit from Google Ads sees different patterns by device, location, and time. How do I adjust my bids to account for these patterns?

Strategy: Segment your customers and use bid adjustments to take advantage of these differences — but first, test at a broader scale to confirm the opportunity.

Pull back for a wider look at your data before you zoom in on specifics. That can help you see where you might segment your customers into meaningfully different lifetime values and margins. Look at aggregate data for location, device and time to find patterns of high or low performance.

 

Segment your customers and adjust bids by location:

Step 1: Find the geographic level (state, DMA, etc.) where the biggest performance differences exist.

Step 2: Calculate your location bid adjustment.

Location bid adjustment = 100 x ((profit per customer from location / average national profit per customer) -1)

Location

National Profit
per Customer

Profit per
Customer

Bid Adjustment
California $175 $250 43%
Illinois $175 $200 14%

You can see that California customers bring this advertiser a profit ($250) that is $50 higher than Illinois customers. And both states return a better profit than the national average of $175. So this advertiser now raises his bids for Illinois, and even more for California.

When you use the automated bid strategies in Google Ads, bids are automatically adjusted for details like location and time of day based on historical conversion values. Just remember to set a target CPA that accounts for the full profit value that’s expected from a conversion.

CASE STUDY: AdHarmonics

“When we started bidding at the DMA level instead of nationally, we discovered that some customers were creating more value. We were able to increase our bids by up to 30% trying to reach more of these customers. As a result, we saw 60% more conversions and profit,” says Seth Birnbaum, CEO of AdHarmonics

 

Conclusion

In your local supermarket, brands compete for premium shelf space. They want to be in the best spot possible to catch the eyes of ready-to-buy shoppers.

Today’s online advertisers fight for the same premium spots on the “digital shelves” of search pages and wherever consumers gather online. And this market is open 24/7 to shoppers using every kind of device. You have to be there and be seen at the moment they need you.

In this paper we’ve seen how some advertisers succeed by staying on top. They:

  • Measure all the things that help create profit
  • Test on a broad scale to quickly find profitable opportunities
  • Earn the most profit from those opportunities by managing their bids smartly

It’s never just about bidding up. It’s about winning the right customers who will bring your business the greatest value over the long-term.

“If there’s real long-term value in your customers, then investing some of that value to grow can lead to a great deal of material profits. Bidding is your means of controlling how much of that to invest right now,” says George Michie, Chief Marketing Scientist of Rimm Kaufman Group.

The hidden profits are there to be had in your campaigns. Consider this to be your trusty treasure map. It’s now up to you to find the gold!

 

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