Optimizing your Google Ads bids is crucial for maximizing returns. It’s like finding the sweet spot between spending too much and gaining the most from your ads. Let’s dive into the basics of bid optimization using marginal ROAS (Return on Ad Spend) and marginal CPA (Cost Per Acquisition).
Understanding ROAS
ROAS is your compass in bid optimization. Picture it as a pivot table where keywords and various columns, like CPM and CTR, reveal the health of your campaign. For instance, a keyword might have a reasonable cost per click but a lackluster conversion rate, leading to a lower ROAS. It’s the telltale sign that adjustments are needed.
Calculating Suggested Bid
To set a manual bid, start with the value of a lead, say $45. Multiply it by the number of leads to get total revenue. Divide this by the total clicks for the revenue per click. Calculate the cost per click and divide it by clicks minus one. Now, divide the revenue per click by the cost per click. The result indicates how much higher your revenue per click is compared to the cost per click.
Adding a Dampener
To avoid drastic changes, consider a dampener, like a 20% cap. This ensures bids won’t increase by more than 20%, providing a safety net for bid adjustments.
Real-world Example
Imagine your CPC is 55 cents, and the suggested bid is around the same. This suggests breaking even with the CPC. However, if the CPC is 70 cents, a significant bid cut might be in order. The dampener prevents extreme adjustments, keeping things steady.
Conclusion
Bid optimization is a powerful tool for Google Ads success. By decoding ROAS and utilizing a calculated approach to setting bids, you can strike the right balance between cost and return. While this method isn’t foolproof, it provides a practical guide for marketers aiming to make informed bid decisions. Remember, in the dynamic realm of digital marketing, a nuanced strategy often yields the best results. Happy bidding!