Google Ads Smart Bidding Strategies: The Ultimate 2020 Guide

Google Ads Smart Bidding strategies are at the core of pay-per-click management. Essentially, bidding is a lever that digital marketers pull to adjust the price they wish to pay for each click or impression. Increasing bidding amounts can cause a particular keyword, targeting method, ad group, or campaign to show more often and in higher positions.

Expanded reach and ad prominence are desired by all digital marketers, but the big question is whether the price is right. There is a balance to strike between maximizing impressions or clicks and minimizing the price a digital marketer has to pay. Understanding bidding strategies is crucial to locating this sweet spot.

1. Why Should You Focus On Smart Bidding Strategies?

In pay-per-click (PPC) advertising, there are many options when it comes to bidding strategies. There are no clear-cut right or wrong approaches to take, but there are certainly strategies that cater better to different business models, sales journey tendencies, and overall goals.

It is important to understand the implications of all the bidding strategies available so you can maximize your PPC efforts. For example, if you want to increase web traffic, then a bidding strategy that increases impressions for brand awareness wouldn’t make sense. If you want to increase conversions on your website, then a bidding strategy to maximize clicks on your ad also wouldn’t be the best option.

In the end, PPC is a numbers game, and bidding can make an immediate impact on these numbers. Understanding the types of levers available to adjust the numbers is crucial for PPC success.

2. Business Goals

The first thing you need to consider when deciding on a bidding strategy is your pay-per-click advertising goals. Are you trying to raise brand awareness? Or maybe you want to increase web traffic? Perhaps your goal is to increase conversions, or even drive foot traffic to your brick and mortar location.

Via Google

After deciding on a goal, you need to gain a better understanding of the relevant metrics behind each goal. Impressions, website clicks, website visitors of a certain duration, conversions such as form fills, and purchases can all be measures of success.

Do you have a system in place to measure the key relevant metrics? How much are you willing to pay for a certain number of successes? Often, you’ll have to ask yourself how much these successes are worth to you.

Perhaps each of these digital touchpoints has a specific success rate and value. You can combine these two variables for a touchpoint to come up with the expected value of a conversion and determine how much you’re willing to pay for each type of conversion or touchpoint.

Via Digital Marketer

Even if you’re just guessing at the value and probabilities of certain touchpoints in your digital marketing sales funnel at first, it’s a good exercise to help you get started, and you can always refine your numbers as you gather more data from your campaigns. Do not be discouraged if you don’t immediately have insights into your sales funnel.

3. Customer Lifetime Value

Only when you understand the true value of your customer can you optimize with the right bidding strategy. What is your average customer worth over their lifetime? This can be a difficult question to answer because every customer is different.

Via Kaushik

Can you predict lifetime value based on specific audience attributes, like company size, industry, or some other characteristic? Profits can vary between customers that come in through various targeting segments. Can you really narrow down the value of a customer that comes in through a certain keyword, in-market audience, or audience target?

The possibilities can be intimidating, but just like with your business goals, starting with an educated guess that can be refined over time is far better than ignoring this aspect altogether.

Over time, you can accumulate and analyze this data, but many businesses struggle to even find an average for customer lifetime value. Having an estimate that you’re willing to roll with to get started is important when running PPC campaigns, and as you gather more data, you can refine your values by segment.

You can get pretty granular when it comes to the value of a customer and predictions on what a customer will buy in a lifetime when it comes to Ecommerce PPC strategy. Ecommerce strategy can be an entire article on its own, so for this article, we’ll be focusing on bidding strategies not related to Ecommerce.

4. Understanding The Value Of Different Audiences And CPA

We all know the value of sales funnels and audience targeting. Can we attach a value to specific levels of the funnel or certain audiences?

Understanding your goals at increasingly engaging parts of the customer journey – combined with a deep understanding of what your customers are worth (i.e. customer lifetime value) – will help you determine how much you should be willing to spend on different audiences, touchpoints, or sales funnel sections.

This cost-per-acquisition (CPA) is a crucial component of your digital marketing strategy. But again, don’t be overwhelmed with deciding on a definitive number early in the process. An educated guess is better than nothing. And you will analyze the data – such as by using data ranges when you don’t change the bids in ‘lookback windows’ – to see how campaigns or targets performed for certain bids.

Via Search Engine Land

After running campaigns for a certain period of time, you can analyze the data and either make adjustments or continue until you have enough statistically significant data. However, I wouldn’t focus too much on the idea of your data being ‘statistically significant’ because the rigor needed to truly accomplish this could be unrealistic.

Instead, focus on date ranges that encompass a good amount of data. Relatively speaking, most digital marketers don’t have the weeks – and sometimes months – necessary to produce the rigorous data worthy of high confidence levels.

Via Search Engine Land

With the granularity needed to be precise in interconnecting messaging, large and rigorous data might be out of the question. Search Engine Land makes a good point to move up the hierarchy of data or to expand your data range in order to find the most relevant and significant data to make smart bid management decisions.

5. Automatic Or Manual

Automated PPC management uses increasingly advanced algorithms that understand users better than their families do. However, those who write the algorithms (aka Google themselves) are also the ones taking your money, so giving up control relinquishes authority to a party that innately has a conflict of interest to get you to spend more money.

Google balances this by creating checks within their bidding system so you can control when to decelerate spending on a campaign. For example, you can set specific budgets.

6. Manual Bidding Concepts

If you have the time to analyze your data often and go in to make changes to keywords, ad groups, audiences, etc., then by all means use manual bidding.

The same balance you seek in finding a sweet spot between accomplishing your goals, minimizing your cost, and maximizing ad position for CTR will apply, but you’ll be doing those analyses manually.

The highest position is usually not the best, as 2nd or 3rd can be an optimal balance of top ranking for least cost – but with high CTR. However, as usual, it’s all about testing these assumptions and making sure they align with your business’ unique goals.

Another concept to understand is seasonality, and how different periods of the year affect campaign performance. For example, the retail industry sees drastic upticks during the holiday season, whereas B2B companies probably see a downturn during the same period.

Also, factoring in competitors going in and out of auctions can affect bidding. Constant monitoring is important to recognize changes in ad position and CPC costs attributable to these types of changes.

Finally, when starting out a campaign, a high CTR is necessary to get your campaigns off on the right foot. So bidding high to get high ad rank is necessary at the beginning of successful campaigns. Google says they standardize for ad position, but test for yourself, and pay attention/analyze reports to understand how different bids and ad position affect your return in conversions and dollars.

Bid bumping is the label for this basic tactic that allows your keywords to maintain a high average position, even after you’ve lowered your bids.

It works by temporarily paying a higher CPC and getting a higher click-through-rate. By then slowly lowering your bids, you may find that your performance stays the same, but your average CPC and conversion cost goes down.

7. Target CPA

Target CPA is a great bidding strategy. It’s especially wonderful if you’ve given time and resources to figuring out the sales funnel process and understanding customer lifetime value.

You should tend to use more automated bidding with increasing amounts of data that is more and more statistically significant and takes into account variables that aren’t immediately visible to you. (Things such as competitors going in and out of auctions, behavioral data that platform algorithms now contain which can add a layer of predictability to the likelihood a user is to convert, etc.)

Usually with CPA bidding, platforms require a minimum amount of pre-existing data – like having 30 conversions over 30 days – for the algorithm to start with confidence.

8. Target ROAS (Return On Ad Spend)

Bidding based on target ROAS is similar to bidding based on CPA, but with a little extra math involved. Instead of just focusing on increasing conversions, targeting based on ROAS associates a dollar value to conversions.

This is a great Ecommerce bidding option if you have different products with various margins, but you want a quick and easy way to keep a baseline profit across all campaigns. This probably isn’t the smartest idea if you want to maximize profits. To maximize profits, you would get more granular to understand how each product or service has a different ROAS for various volumes of conversions, and you would find a sweet spot that maximizes revenue and profit.

Via The Search Guru

This chart shows how difficult it can be to find that sweet spot of revenue and ROAS when throwing in just one other relevant variable that we’ve discussed – namely, seasonality. It is hard to see whether the changes are a result of the time period or the changes in bidding, or whatever else was going on during this time frame.

However, if you kept your bids the same throughout this entire period (unlikely since its over six months, and that would be a long time to go without adjusting your bids) then you could determine certain time periods and ROAS targets that could maximize revenue. As you can see, lots of testing over long periods of time are necessary to suss out the maximal targets.

For both targeting ROAS or CPA, you’re essentially giving up some control to the algorithm. So if you want more control on adjusting different aspects of a campaign, such as ad scheduling or making bid adjustments throughout the duration of the campaign, then these bid management methods are probably not right for you.

9. Maximize Conversions

The name of this bidding strategy encompasses its essence. You’ll want to make sure you set an appropriate and viable budget each time, and Google will do whatever it can to maximize the number of conversions you get. If you’re only concerned about getting the most for a specific budget without worrying too much about the return, then this bidding strategy is perfect for you.

10. Enhanced CPC

Unlike maximize conversions, this targeting method is a little more complex, which reflects the amount of control you retain by employing it.

You still set the bid, but Google gets leeway to adjust the bid based on its algorithm and whether that algorithm predicts a high likelihood of conversion. For example, Google can increase your bid if it sees a corresponding increase in the expected value of a conversion. Conversely, Google can lower your bid when the pricing is high and the likelihood of a conversion is low.

11. Maximize Clicks

If you want to drive website visits based on a certain budget and forget about your campaign, then this method is a good fit for you. Just set the appropriate budget and wait for the visits to come in. This method is also great for awareness campaigns, as well as marketing departments that may not have the resources to devote time and energy to the campaign.

12. Target Search Page Location

This is another awareness campaign strategy that keeps you at a certain position in ad rankings. When you just want to show up a specific position without worrying about costs – aside from a set budget – then this bidding strategy is ideal.

13. CPM And vCPM Bidding

When bidding for awareness campaigns, some goals require only that the user saw the ad, and so knowing the difference between CPM and vCPM can be important. CPM bidding is how much you want to bid for 1,000 impressions. vCPM is 1,000 viewable impressions, which means it was in view of the user for at least one second.

As always, experimenting with your metrics to see which method gets more bang for your buck is the best strategy to see which suits your business best.

14. Target Outranking Share

Targeting to outrank is a major competitive move. You can actually choose a website or competitor that you want to outrank and program your campaign to specifically outbid that competitor when you’re in similar options. But, how does this work if both competitors use this function?

You can choose the amount of times, or rather, the percentage of the pie (assuming the whole pie is all the auctions that you are both in together) that you want to outrank your competitor and Google will use this goal to bid accordingly. But again, what if they are doing the exact same thing?

As you can see, some of these automated bidding options seem to just be giving Google money, so you have to be careful how much money, erm, control you give over to Google.

15. Third Party Tools

There are countless third party bid management tools out there. But, the pricing simply for bid automation can be prohibitive when you consider the fact that other tactics – such as landing page optimization and copy testing – can yield bigger gains. If you’re thinking about using a third party tool, you either have an enormous budget, or you’re probably not making the right choice. Consider a team that can help you maximize all aspects of your digital marketing efforts instead.

16. Bid Adjustments And Their Effect

These days, you can make bid adjustments for the many different layers of data that you can add to campaigns, such as demographic data, audience data, device, ad scheduling, and much more. The options can be dizzying, so when you’re employing a smart bidding option, it’s best to not deal with bid adjustments.

However, if you’re manually bidding or using scripts as bid rules, then bid adjustments might make sense (depending on your campaign). Just be wary and document fully where you’ve made bid adjustments so you can identify their effect, as well as for reference when referring to the data.

17. Custom Automation In Scripts

Bidding scripts are for those that want to build their own algorithms. You get the control and the flexibility of sitting back and letting bids work themselves out based on the rules you implement. This is an advanced strategy, and requires lots of time and knowledge. While the rewards of this bidding style can be immense, understand that you can spend as much time mulling over rules as you can on manual bidding and analyzing reports.

18. Automated Budgeting Using Rules

Rule based bidding can be a simpler alternative to writing your own scripts to implement your proprietary algorithm. You can now set conditional statements that adjust the bidding based on your needs

Via Search Engine Land

You keep the control of manual bidding while devoting time to the rules you create, as opposed to manually making the changes yourself. The time commitment is more upfront in creating the rules. However, you still have to do analyses and monitor your campaigns closely; don’t get complacent because you’ve set rules!

Here are a sampling of rules you can apply:

• Adjust campaigns around a holiday or promotion
• Adjust bids based on CPA and conversion performance
• Adjust bids to maintain a certain position or impression share
• Lower budget on campaign based on CPC values
• Increase budget based on performance

As you can see, the possibilities are endless. Think about your priorities and goals to help limit what rules you enable and slowly build out more once you’re comfortable with the process.

19. Notifications Are Half-Automated Strategies

You can have emails sent to you notifying you about certain thresholds being hit for certain KPIs. This is yet another way to monitor your campaigns without really monitoring them.

Use this strategy in conjunction with other manual bidding techniques. You can also use notifications to be a two-step safety valve for rules that you create on your own to ensure they are functioning as you intended them to.

20. Google Bid Simulator

If you’re doing manual bids and you’re being extra careful, or you’re doing a smart bidding technique, but you want to have some kind of forecast available for your supervisor, then Google has bid simulators that can estimate how your campaign will look based on various bid changes.

21. Brand Bidding

The value of branded keywords has been written about many times, and it is important to understand the intricacies and nuances to bidding on your own brand. The benefits don’t fit into the scope of many of the metrics we’ve talked about, such as CPA, conversions, or ROAS, but the campaign effects are tangible. Warding off competitors looking to capitalize on your campaign has value, but can you put a number on it?

It is important to understand some of these benefits, such as the all-important Quality Score, and bid accordingly.

22. Stacked Bidding For Keywords

Prioritize the best keywords like your best performing products. Stacked bidding takes into account that some keywords (exact over broad, for example) can have more value than others. Some targets can have more value than others (high ROI products vs. low ROI products). Even some audiences can have more value.

Some of these segments lie within larger segments, and you want to give the smaller segment the advantage because of the value and specificity – which is why you use stacked bidding. This is a method to be combined with manual bidding techniques, like enhanced CPC.

23. Experiment Testing

Like all aspects of PPC, testing and experimentation can be the most insightful and effective way to improve performance. Experiment with positions, and correlate these positions with other KPIs, like conversions and ROAS. You never know what insight you’ll gain because every business is different.

24. Pros And Cons To All Bidding Strategies

Flexible bidding strategies employed to fit each unique situation can be the best method to approaching your digital marketing endeavors. Here is a quick review of concepts we’ve already covered. Knowing the tools in your digital toolbox is an important first step in creating the most efficient bid management strategy.

Via WordStream

There is no perfect bidding strategy, so you need to test what works for you. Understand the variables at play and don’t jump to conclusions about performance.

25. Seasonality And Confounding Variables

We’ve discussed this before, and seasonality is just one of the external variables like competitor behavior, consumer behavior, and industry trends that can affect campaign performance. Be sure to apply what you know of these external variables before you react to how your bidding is performing.

26. Bid Strategy Reports

Analyze the numbers of your changes constantly to gain insight. Even if you don’t hit the perfect bidding strategy right off the bat, the continuous data and understanding you gain is invaluable to your business in the long run.

A Final Word

Bid management can be easy or hard these days with the options available to both newbies and seasoned digital marketing pros.

Start with a basic understanding of your business goals and then create a plan based on the time and other resources you have available to implement a digital marketing strategy. Bidding can eliminate lots of time, but relinquishes lots of control. On the flip side, manual bidding can keep you on top of everything going on, but you might not have the time, energy, or human capital to keep that going efficiently.

If you need extra human capital to help, you can always reach out to our awesome team to do the work for you. In the meantime, happy bidding!