Google Shopping Ads- Bidding Strategy

Google Shopping Ads- Determining Budgets and Bidding for Campaigns and Keywords…

Creating different product groups in Google Shopping Ads allows you to bid on them separately which can open doors to different levels of strategies.  

What should you know before you start thinking about bidding?

What is your CTA or Cost-Per-Acquisition? You can determine this by answering another question – how much are you willing to spend to acquire a customer?

Are you focusing on the short goal or are you playing a long-term strategy where you’re more concerned with the customer’s total lifecycle value? 

Can you somehow group your products according to their value that they can bring you? The value, in this case, is not just their price, but also, the level of their demand. A pricey product that is rarely sold has less value to your business than a cheaper product which is sold often. 

Now that you have taken all of this into consideration let’s explain how bidding works. 

We already know that Google Shopping ads enter into an auction process once Google determines they are a good fit for a user’s search query. What happens next can be described through the following rule:

Bid too much and you’ll kill your efficiency. Bid too little and you’ll never gain any traction.

If the bid is to low, perhaps another ad will win the auction – we lose the potential customer.

If the bid is too high and our ad wins the auction – we might spend more than we can endure.

The goal of bidding is to find the sweet spot and not go too high, neither too low.

Let’s take a look at what will influence our decision:

Product Price – There is a difference between a $10 product and a $100 product

Profit Margin – You can calculate the profit margin by subtracting the product cost from the product price. The profit margin will give you a more precise picture of the situation than a product price will. Profit margin is often described through a percentage rate.  

Conversion Rate – A percentage rate that measures the number of prospects which have converted, made the purchase, out of the total number of visitors. Keep in mind that the conversion rate from paid search is generally lower than from organic search or direct site visits. This is not a rule as certain products in Google Shopping can convert at 2-3x a site’s average.

With these three elements, we can calculate the maximum amount you should bid for an ad at the product level. This is going to be your maximum cost-per-click you should be willing to invest. 

Max CPC =  Product Price * Profit Margin * Conversion Rate

If a product costs $100, has a profit margin of 0.4, and a conversion rate of about 0.02 the maximum CPC, the maximum amount you should bid, will be $ 0.80.

Of course, you will almost never invest all of your profit back into advertising since it wouldn’t make any sense to spend it all.

Instead, it will usually be somewhere between 0.30 and 0.80 of its total value. This rate can be labeled as your PPC Investment Rate and it will vary depending on a few factors. 

Target Bid Level = Max CPC * PPC Investment Rate

Determining the investment rate is not an easy thing. Naturally, for products that bring more return and value, you will bid more. If sales levels change throughout the season, so should your investment rates. We will explain more as we progress through the article.

A good idea, if you’re starting for the first time, is to be slightly conservative. Start low and if you don’t see any new impressions after a few weeks you can start raising your bid levels. It’s a rare thing to hit your daily budget limits when starting out low. 

Since every e-commerce business is different, it’s important to see how your products behave and what works. 

Give your campaign space to grow. If you allocate a small budget Google will be reluctant to show your ads. Your budget could diminish in less than 10 clicks and Google knows this and wants to “save you”. 

You can configure your delivery to be Standard or Accelerated. Accelerated delivery means Google will show your ads whenever it’s eligible to show and as quickly as possible.

The golden rule for any type of digital advertising is checking, tracking, and updating. When you first start your campaign monitor and update bids 2 to 4 times per week for a few weeks. Depending on how many products you sell you will either have to adjust bids weekly or daily for big feeds or monthly if you have only a few dozen to hundreds of products. 

There are reports which you should periodically review:

Google Ads – the Dimensions Tab – View by – Shopping

If you look under the Product ID section you may find the next three categories. 

• Products with no Impressions – in this case, the bids are too low, or your feed isn’t providing Google with clear enough info to display your products. 

• Possible solution: Start increasing your bids or go back to your feed and check if you followed Google’s recommendation and that you have optimized your feed properly. 

• Products with High impressions, but No or Low Clicks – in this case, Google finds your ads relevant for the search queries but users aren’t clicking.

• Possible solution: Revise your Google ad elements,  check if the price is too high or if the image is inadequate. 

• Products with High Clicks, but No Conversions – users click on your ads but there is no conversion, they don’t buy.

• Possible solution:  There is probably an issue with your landing page in this case. 

You can also use the Search Query Report and Product Performance Report to monitor your campaigns. 

Want to Try Google Shopping Ads?

Let the Google Shopping Ads experts at ElectricBot assist you with setting up your new Google Shopping Ads campaigns and remarketing ad campaigns today! Click here to find out more about our all-inclusive organic and paid ad search engine marketing services or Call- 1-201 565-3050

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