Although not the most important aspect of campaign management, the setting of bids is vital to ensuring you only spend money at a level that is profitable for your business. When setting your initial bids it is important that you have in mind how many clicks it will take on average to gain a customer (conversion rate) and how profitable your products are – with this information you can work back to how much you can afford to pay for a click.
Your keyword bidding is capped by setting a Max CPC – the maximum cost-per-click you are willing to pay, and can be set at either Ad Group level (meaning it applies to all keywords within the group:
Or, at keyword level – in this instance it is required as you are likely to want to bid more on the higher value 'large zorb':
In general it would be best to start with Ad Group level bidding for most campaigns, and raise/lower bids based on performance measured in the initial stages.
The Relationship between Max CPC and Quality Score (QS)
Before you actually go off and start setting your bids, it's important to understand what part the max cpc plays in the overall ranking of your advert.
Let's recall the definition of QS discussed last time:
“A Quality Score is calculated every time your keyword matches a search query -- that is, every time your keyword has the potential to trigger an ad.”
Within this calculation, one of the factors of the calculation is your max cpc for the keyword, and we can think about it in the most simple of terms as Overall Ranking Score = QS x Max CPC. From this we can take that you don't need the highest bid to show your advert in one of the top positions – if you have achieved a good QS through having a highly targeted, relevant campaign you can be competitive without breaking the bank. This is Google rewarding you for providing their users with relevant content.
The AdWords Discounter
The dynamic nature of the bidding landscape given by the above ranking method means that a dynamic pricing structure is required. Google's answer to this is the AdWords discounter. This feature monitors the level of competition and ensures that you only ever pay the lowest price possible to be placed in the best possible position for your cpc.
Lets look at a simplified bidding scenario with only two company's bidding on a keyword:
- Brand A: max cpc: £0.50, QS: 5 – overall rating: 2.5
- Brand B: max cpc: £0.50, QS: 6 – overall rating: 3.0
As Brand B has a greater QS it's overall rating is quite a bit bigger. The minimum pricing factor that they require to still have a greater rating is around £0.42, and thus would be the actual price charged to appear above Brand A for the click.
Advanced AdWords Bidding Features
Many companies choose to use advanced tools technologies to control their bidding strategy, automating the process using statistical methods to ensure the get the best ROI. This is a very effective way to get a good return, although there is a cost involved in using the products (such as DoubleClick or Kenshoo) which affects the bottom line, meaning it's not ideal for smaller campaigns. In recent times Google has made some of the enterprise level bidding feature native to AdWords:
The bidding options can be found in the Settings tab of any campaign.
Manual Bidding for Clicks
As it says on the tin, it's all up to you to manage.
Automatic CPC Bidding
Uses data to achieve either the maximum number of clicks for a given budget, or aims to try and increase the competitiveness if you have a budget target you'd like to hit. This adjusts cpcs automatically, but does not affect the budget.
Automatic CPC Bidding – Enhanced CPC
Uses your historical data to try and estimate the conversion rate for each auction and maximise the ROI
Use CPA Bids
Let's you set the amount your willing to pay for a conversion (at Ad Group level). It's worth stating that the result is not always below your CPA target (this would be to good to be true) as AdWords uses historical data to try and predict current activity, but with so many factors involved it is difficult to be accurate at all times.
Now that you are armed with the ins and outs of bidding in AdWords, now is the time to roll up the sleeves and get your hands dirty doing it yourself. Later in the series we will cover more advanced topics such as how to use analysis to inform your bidding strategy, but for now the best thing to do is become familiar with the basics and day-to-day requirements of bid management.