Keyword bidding is the most powerful lever you can pull to increase or decrease volume quickly. That's why it's also the most overused lever in paid search campaigns. Campaigns that rely too heavily on tactical bid changes to drive efficiency and volume never reach their complete potential.
It's impossible to discuss bidding without discussing program goals. If you manage a ROI-focused campaign, then your approach to bidding will be vastly different than if you manage an impression-based branding campaign.
Because our experience lies heavily in new customer acquisition and ROI-focused search programs, the theme of this article will assume ROI as the primary success metric.
Define Business Rules
In a retail environment, the keywords in your program are a reflection of the products you sell. Profit margin defines the level of tolerance retailers will have as it relates to what they are willing to spend to drive a sale.
For example, if a retailer is selling in both the ink cartridge category and the office furniture category, and the ink cartridge category drives a 35 percent greater profit margin than office furniture, that retailer may allow a lower ROI in ink cartridges to maximize volume and bottom-line profit.
Some of the most successful paid search campaigns align these business rules with their paid search programs. Understanding this level of detail allows for clear bidding strategies at a category and product level.
Hyper-bidding: An Infinite Loop
If you've dabbled in computer programming, then you're familiar with the concept of an infinite loop. It's a process that can't stop executing because its conditional expression can never be true. It's like a dog chasing its tail.
Hyper-bidding, or the act of making multiple bid changes per day in reaction to your competition or in an attempt to reach a specific goal, is equally as futile and unproductive.
The SERP and competitive space is too dynamic for hyper-bidding to be effective, with the exception of extremely high-volume keywords that allow for statistically significant decisions to be made quickly. These high-volume keywords are usually the exception and not the rule.
It's important to give keywords, or portfolios of keywords, time to accumulate enough data to allow you to make an informed decision on which way the bid pendulum should swing. Several bid adjustments per week, not day, is usually most productive.
Google recently rolled out a new beta feature in AdWords named Experiments. You can find it under the Settings tab within a specific campaign.
This easy-to-use tool allows you to split-serve an "experiment" or test bid versus your current control bid. If you've ever wondered how a portfolio of keywords would perform at a $0.50 CPC versus a $0.70 CPC, this tool will make it easy for you to test out your hypothesis in a clean testing environment.
Know Your Peak Hours and Days
In working with one retailer, we achieved optimal ROI between the hours of 3 p.m. and 4 p.m., and that a wider efficiency net was cast between the hours of 11 a.m. and 5 p.m. We took this data and coupled it with bidding strategies to increase CPCs during the hours of the day that we knew would allow for greater spend tolerance.
If your ROI goal is X, and you're achieving 3X at certain times of day, elevate your bids to capture more demand during these times -- as long as it holds within your efficiency threshold.
Conversely, we found the largest variance of clicks to orders were occurring between the hours of 8 p.m. and 11 p.m. Decreasing bids and suppressing volume in these scenarios allowed us to move those dollars to support the more efficient days of the week and times of day.
Once you've identified your peak days and times, setting the complementary bid rules is a cinch.
Under the same Google AdWords Settings tab that you found Experiment, you'll also find Ad Scheduling. Within the Bid adjustments feature of Ad Scheduling you can easily throttle your bids based on times of day and day of week.
A final word of caution as we close out the bidding discussion. You don't have to be in position 1, or even in premium positions 1 through 3 to be "winning" in paid search. This is even truer on highly focused ROI campaigns.
Rely on the data to dictate your optimal position and CPC. More times than not we find our keywords performing optimally at CPCs that hold ads on the right rail in average positions of 4 through 6. It can be a comfortable place to be, especially if you're the type who likes to be sitting in profits.
Stay tuned for the fourth and final article of this series where we'll cover the critical topic of paid search measurement.