Join Brad Batesole for an in-depth discussion in this video Deciding on bid settings, part of Google AdWords Essential Training.
- At this stage, it's time to talk about our Bid Settings. So I'm gonna continue scrolling beyond the Languages section and we'll arrive here at the Bid strategy section. You'll see I have Bid strategy, Default bid, and Budget. Before we talk specifically about your Bid strategy, let's consider that when you select your AdWords budget, there are two things you need to keep in mind. How much is a sale from a potential customer worth to me? And, what is the maximum amount I want to spend each day? Let's say the land and hotel is trying to get people to stay at their hotel.
First, we need to decide how much we're willing to spend to achieve that goal. We can start by looking at our product. In this example, let's say we make a $100 in profit on an average day at the hotel. So if a customer visits our website, clicks Book Now, we can expect to profit a $100. With this knowledge, let's say that I would be willing to spend up to $50 to make that sale happen. That means our cost per acquisition cannot exceed $50. So now we're willing to pay $50 for someone to click Book Now and we'll make $50 in profit.
Okay, so we know that our target cost per acquisition is $50. Now, we can't set our default bid to $50 because then we might pay $50 for every click. And we know that every click doesn't equal to sale. So we need to figure out how many clicks it will take before someone buys our product. And because we're starting with our first ad in this example, we don't know how many clicks it's going to take to convert a user. So until you have data, you have to make assumptions. So let's start with an assumption that 3% of the people who've seen my ad, more specifically received an ad impression, will click on it.
3% would be a decently performing advertisement. And then let's assume that of the amount of people that arrived on our website, 5% of those will click Book Now. So far ad has a 1000 impressions, we would get 30 visitors. Are you following? A 1000 impressions multiplied by that 3% click rate means 30 people are now on our website. But we again know that those 30 visitors that come to our website are all going to buy our product. That would be awesome but it doesn't work like that. So we're assuming that 5% of those people will book our hotel.
And if we take 30 visitors times a 5% conversion rate, we get a number of 1.5 and we'll round that down to one. So now we know that we need to get 30 clicks for $50 or less. And we're assuming that every 30 clicks equals one sale based on this math that we've just done. So what we'll do is we'll take that $50 CPA and we'll divide that by the 30 clicks that we need and we get $1.66. This means that we should set our maximum bid to $1.66 per click.
Now it's always hard with the first ad. With future ads, you can look at your own performance data to determine how to modify your bid based on your actual click through and conversion rates. So let's go back and apply this information into our AdWords campaign. So Google's going to default here the Basic options menu and it's going to allow you to manually set your bids for clicks. And if you're going to do this, you would then choose the Default bid down below. And here I would add a $1.66.
This means that Google's going to default every bid to a dollar and 66 cents. And below that, we would need to set our Budget per day. And we'll talk about this in just a minute. But I wanna also point out what happens when you choose Advanced options. Here, Google gives you some additional criteria that you can use to help your campaign along. Now you already set to manually set your bids for clicks. Now you can also choose to let AdWords set your bids to maximize clicks within your target budget. So now what Google is going to do or say, "Well give me a cost per click bid limit." Here we could say if I check the box, we could say $1.66.
And Google's going to say, "You know what? "I'm going to try to maximize clicks for you." So it's not just going to automatically bids sort of on this generic clicks. It's going to maximize the amount of clicks for this maximum budget. Now you also have the option to focus on conversions which is grayed out. And what this would do is allow Google to automatically bid towards people that are most likely to convert. And I will talk more about this when we go into setting up your Conversion Optimization. There's also the opportunity to select a flexible bid strategy.
And this is where you create some various rules and criteria to automatically change the bids based on various things that are happening. Now, I'm not going to go into this in this course but feel free to explore it by choosing Create flexible bid strategy and following the prompts there. I'm going to go back to Basic options and choose I'll manually set my bids. Go ahead and set that back to $1.66. This is really the best way to get started and it's also the easiest and it helps you really gets some additional information. Remember, the first couple of months of online marketing spend should really be treated as a market research budget.
You're going to spend some money to get some data around what's working and what's not. And from there, you'll be able to make smarter marketing decisions. So the last thing we need to do is decide how much we're going to spend each day. And there's an important copy out here. You see, that actual spend may vary print just below here, Actual daily spend may vary, well, this is what it means. People are thinking about monthly budget but you have variances in clicks over weekends and weekdays. And so AdWords is going to reserve the right to overspend on your account but to 20% on any single day.
But you'll never actually get charged more than you planned for the entire month. So, let's take this as an example. Let's say I set my daily budget at $10 per day. On any given day during the month, Google could spend up to $12 to make up for days that it believes I won't hit my $10 limit. But over the course of that month, Google would never spend more than $304 which represents my $10 daily budget multiplied by the average 30.4 days in each month. So when you think about Budget, simply take a dollar amount for the entire month and divide it over 30 days and Google would do about a 20% increase if it needs to.
I'll go ahead and set a $50 budget per day but you'll want to set your budget based on how much you can afford and how many conversions you're hoping to get each day. And again, because we're not sure yet, I'm starting out with a sample budget that I feel comfortable spending. Now technically, this is all we need to start advertising. But there are still a few additional features out there that you want to take advantage of and we're going to talk about that in the next movie.
Once you've set up your campaign, you'll learn how to use AdWords reporting and Google Analytics to monitor the performance of ads and optimize ads to get more clicks, conversions, and ultimately more return on your investment (ROI) in search advertising. Plus, learn about audience remarketing and what ad extensions can do for you.
Because Google frequently adds new features and functionality, we're committed to keeping this course up to date with the latest training. Check back often for updates!
This course is part of a Learning Path approved by the American Marketing Association.
Gain the skills you need to become an AMA Professional Certified Marketer (PCM) in Digital Marketing by using the industry-leading courses and resources in the Learning Path. Take the AMA certification exam to show that you have what it takes to lead the digital transformation.
- Understanding Quality Score and the auction system
- Setting realistic expectations for your AdWords campaigns
- Creating an AdWords account
- Researching keywords with the Keyword Planner tool
- Setting campaign budgets and bidding
- Writing great ad headlines and copy
- Using ad groups
- Creating and exporting reports
- Measuring ROI
- Setting up Google Analytics for conversion tracking
- Optimizing ads
- Adjusting bids
- Creating a remarketing campaign
- Using ad extensions
Skill Level Beginner
Q: What are ad formats?
Q: This course was updated on 1/04/2016. What changed?
A: We added one new movie covering the Audience Insights feature.
Q: This course was updated on 06/29/2017. What changed?
A: The following topics were updated: an overview of AdWords, where ads appear, understanding the AdWords structure, understanding quality score and the auction system, choosing a campaign, an overview of ad extensions, advanced campaign settings, writing your text ad, and creating an ad group and adding keywords. In addition, new videos were added that cover creating text ads and finalizing a campaign.