Adjusting your keyword bids will lower your CPA

Every time a person searches for something on Google, an AdWords auction takes place -- All keywords (across all AdWords accounts!) that match the query go head-to-head to fight for the slots at the top of the page. Of all the factors determining the winners, 'bid' might be the most important. 

The higher you bid, the more often you'll appear in search results, but the more you'll pay per click. Finding the right balance is key.

You'll usually want to adjust a keyword bid based on its performance relative to your CPA target:

  • If a keyword is performing better than your CPA target, you should raise its bid to increase volume and conversions.
  • If a keyword is performing worse than your CPA target, you should decrease its bid to reduce its cost and volume.

Note that as you bid more, each click becomes less cost effective. In some cases, within a limited budget, bidding less can increase your number of clicks!

Some opinion from Opteo: We tend to see excessive focus on bids and bid modifiers from account managers. While bids are important, it's easy to get lost in micro-optimizations that don't matter as much as messaging, creatives, landing pages, and general strategy. 

How this improvement task works

Opteo looks at all of your keywords, checking for high-spend keywords that are outliers in terms of CPA. If a keyword is doing much better than your CPA target, we'll recommend increasing the bid & volume at the cost of lower efficiency. If a keyword is doing much worse than your CPA target, we'll recommend decreasing the bid in an attempt to improve the CPA.

Technical notes :

  • A keyword must have at least 3 conversions in the last 60 days to be considered by the algorithm.
  • If the CPA is really, really bad (3x your target), we'll recommend pausing the keyword instead.
  • The bid change that we recommend is based on the amplitude of the difference between the keyword CPA and the target CPA.
  • Once you've implemented this task for a keyword, we'll stop scanning it for 60 days. This "cooldown period" allows for a new CPA to settle after the bid change.

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