What am I willing to pay per click?
It’s your first job in marketing and the first task is optimizing the PPC campaigns. You’ve got the report, but how do you calculate what to pay per click for each keyword?
Bid Optimization
The foundational skill every marketer should have is to figure out how much you're willing to pay per click...More
Oh fun, bid optimization! I did this in my first job too :-)
Sure I'm happy to help
There are way more complicated ways of figuring this out, but you just need something simple
Take the historical leads for a keyword, multiply them by how much a lead is worth on average
That's the effective revenue
Divide that by the number of clicks, and that's what you're willing to pay
Assuming you're running marketing to a breakeven ROAS
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It’s important to make sure you get the most out of your Google Ads campaigns. One way to do this is to optimize your bids. Bid optimization is the process of setting the maximum amount you are willing to pay for each click on an ad. This can be tricky, as you want to pay as little as possible while still getting the most out of your ads. To do this, you’ll need to look at the data and calculate the return on ads spend (ROAS).
ROAS is calculated in a pivot table. To edit the pivot table, click edit and you can see the keyword and different columns. You’ll also have calculated fields such as CPM, CTR, etc. which will give you a good idea of why the ROAS is good or bad. For example, if you have a keyword that has a good cost per click but a poor conversion rate, the ROAS will be low.
Once you have diagnosed the data, you can work out the suggested bid. This can be done by multiplying the lead worth (e.g. $45) by the leads to find the revenue generated. Then divide the revenue by clicks to get the revenue per click. Then calculate the cost per click and divide by clicks minus one. Then divide the two together. This will give you the amount higher the revenue per click is than the cost per click.
Alternatively, you can add a calculated field in the pivot table to compare the revenue per click to the cost per click. This will help you decide on a suggested bid. For example, if the CPC is 55 cents, that could be the same as the suggested bid. If the CPC is 70 cents, you could drastically cut the bid.
To make sure you don’t make drastic changes, you can also add a dampener such as a 20% cap. This means you will never increase the bid by more than 20%.
Bid optimization is a great way to get the most out of your Google Ads campaigns. By looking at the data and calculating the ROAS, you can determine the suggested bid. However, it’s important to keep in mind that this is not always foolproof and you may want to let Google set the bids. You can also add a dampener such as a 20% cap to make sure you don’t make drastic changes.
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