Choosing the bid rule that maximizes your KPI
With so many features and settings available in Google Ads, you may be tempted to just fiddle with stuff. Don’t! The efficient PPC minimalist will never do anything in an account without a clear reason.
Our job as specialists is to improve the quality of our ads and the relevancy of our audience and then set the right bids. There are many situations where an algorithm is a poor substitute for the instincts of an experienced professional, but optimizing bids is not one of them. That is one job that should be automated.
Google, Facebook, and Bing all offer automatic bid rules, so there is no reason to use the bid rules in marketing software like Hubspot or Kenshoo, which must rely on their auction data secondhand. While third-party platforms may promise cross-channel optimization, it is better to optimize the bids for each channel independently using the correct bid rule.
An automated rule will adjust your bids to maximize a specified metric, but it will not tell you which metric to specify. It is up to us to choose the key performance indicator (KPI) to target with a bid rule.
The most important KPI you can measure
If you don’t know the revenue generated from a sale, then you cannot use a bid rule that targets return on ad spend. If you have not set up conversion tracking, then you cannot use a rule that targets conversions. If you do not know the customer lifetime value (LTV), or the close rate of the sales team, or marginal cost of the product or service provided, then you cannot optimize bids to maximize profits. Etc.
This is why it is so important to get the best information you can before starting a campaign. If the only thing you know is the client’s budget and you are not tracking conversions, then the most important KPI you can measure is web traffic. In that case you should use the Maximize Clicks rule in Google Ads, or its equivalent in another platform.
If on the other hand you have set up and validated conversion tracking in the platform, then you should use a rule maximizing conversions instead of clicks. Conversions are a more important KPI than clicks.
A bid rule that maximizes X given a defined budget must necessarily achieve the lowest possible price for X that spends the budget. That phrase “that spends the budget” is critical, since the absolute lowest possible price is $0, which will yield 0 clicks. You don’t want the lowest price; you want the lowest price that spends the budget. If you are successful, you will keep adding budget, and that price will increase.
Without a clear reason to favor one click or conversion over another, you should avoid bid adjustments or “enhanced” bidding that would deviate from your maximization strategy. But if you do have good information on the LTV of a customer, you can potentially target a more important KPI than clicks or conversions.
How smart is smart bidding?
I am puzzled by the available “smart bidding” strategies in Google Ads. It offers a “target cost-per-acquisition (CPA)” strategy while the more useful maximum CPA strategy has been retired. It also offers a “target return on ad spend (ROAS)” strategy when a maximize ROAS strategy would again be superior.
Whether you target a specific CPA or a specific ROAS, neither strategy accomplishes what you want, which is to maximize profit. A maximum ROAS would accomplish that. A maximize conversions rule paired with a maximum CPA rule would be a close second-best solution. But the bid strategies currently available Google Ads are just not that smart.
Let us hope that Google will continue to refine and improve its bid strategy options. In the meantime, choose the setting that maximizes the best KPI you can measure, and leave the other settings alone.