CPA starting to get high? Lower the bid price to compensate. That's the automatic reaction for a lot of us who run paid search campaigns on the Google Display Network.
While we may end up spending less money in the short term, the effect appears to be that we're losing out on greater opportunity for better conversions.
What happens, inevitably, is that with lower bid prices, ads start appearing in different areas; we get different placements. We call the effect “shelving” (as in top shelf versus bottom shelf).
Shelving is seen when lowering the maximum cost-per-click (max CPC) so that it costs less to generate a conversion. It does indeed work, most of the time.
However, this is a bit of an illusion. If you aren’t paying close attention to the entire picture, what you're really doing is losing out on opportunities for better quality placements and ultimately, better quality conversions.
When lowering the max CPC, almost invariably, the quality of the conversions you're attracting sees a decline. After having downgraded your presence, opting for lower-quality placements has you featured in areas from which you’re going to generate lower-quality conversions (i.e., you’re attracting the wrong crowd, you’re on the bottom shelf!).
Though you may have stopped the bleeding in terms of your immediate bid and conversion price, what you're doing is reducing your ability to reach the visitors who are more likely to convert into high value clients.
Don't be fooled by the lower max CPC. To paraphrase George Orwell in "Animal Farm", "All conversions are created equal, but some conversions are more equal than others."
While reducing your short-term investment, you're reducing your opportunity to get the "more equal" conversions, or, to sum up more accurately, those conversions that you most want to go after because they mean more money down the road.
With higher bidding, your ability to reach the right demographic for your offering increases. Combined with a good mix of auto and managed placements, you keep your ads in front of the eyes that you need to have seeing them, and keep your long-term advertising strategy moving along in the right direction.
Before lowering your bid prices to address CPA, make sure that you have a good understanding of the quality of the conversions that you're getting, and address it from that standpoint.
The temptation to lower your max CPC can be too powerful to resist at times. Just remember: by lowering that price, you're lowering the quality of your placements and, in turn, the quality of your conversions.