The most important in the bidding strategy is to balance sales volume and profitability. That’s means you need to focus on one objective to be efficient. In general, the conversion rate don’t vary much with Ad Position.
For example : Your ad at the 7th position has generated more conversions than the ad in the top 3. Maybe is better to focus on most profitable ads before others.
Here are the different relationships related to the strategy of bidding :
- If you increase your bids : You will have more conversions but the average Cost-Per-Acquisition (CPA) will be higher.
- If you decrease your bids : You will have less conversions but the average Cost-Per-Acquisition (CPA) will be lower.
- If you increase your bids (with a limited Daily Budget) : You will have less conversions and you Cost-Per-Acquisition (CPA) will be higher.
What is CPA ? It’s an online advertising pricing model. This is the amount you pay for each conversion of a client. Conversions are linked to Purchases, Subscriptions, and to the research of new lead… this is an average, then the CPA can change based on your bids. More you pay for bid, more your CPA is high.
How to calculate your CPA ?
CPA = Ad Campaign Cost / (Number of Impressions * CTR* CR)
CTR = Click-through rate CR = Customers
Example : You pay a campaign CPM (Cost per mille) of 5$. For 3000 impressions, you receive 5% of CTR to the landing page. There is 30% of those 5% who buy something on your website.
CPA = ((5 * 3000Impressions) / 1000) / (3000 * 5% * 30%)
CPA = (15000 / 1000) / (3000*0,05*0,30) = 15/45 = 0,33$
Each time a customer bought something, your cost is 0,33$.
As i told you before, the best is to focus on one objective. Goals could be very different and sometimes contradictory for your business. Generally goals are not mutually compatible. It’s important to think about your most important goal, you have to do tradeoffs.
Example of a campaign with these objectives :
- Aim Ad Position 1-3
- Maximize Profit
- Maximize Conversions
- Maximize Clicks
If you think only about the 3 highest ranked, it’s could be not a good solution. Perhaps the 7th position is more profitable.
- Keep a CPA below 10$
The CPC bids necessary to keep CPA below 10$ may be lower than the CPC bids than maximize your profit, clicks or preferred Ad Position.
You can see the conflict between this two different objectives. Choosing one of them is the best way to succeed.
That’s all for this lesson,
But i would like to thank several people, more precisely the first followers of my blog.
THANK YOU VERY MUCH TO : Jaytheanalyst, Tash Tomas, Jenn, Kylie Bannink, Rickywrightseo, Henry Brady and Ed Kirwan.
Don’t hesitate to send me an email at “firstname.lastname@example.org” if you have any suggestions :P
- Tips to lower your AdWords cost-per-conversion (CPA) (stateofsearch.com)
- All Hail Quality Score – King Of The AdWords KPIs! (searchengineland.com)