Google Shopping is the most important advertising channel for many online shops. The amount of conversions is high, but so are the costs. How do you get the maximum return on this marketing investment?
Your ads on Google are shown more often if you pay more. These ads must of course yield more than they cost. What do you have to pay to maximize your profit?
How does bidding work?
With Google Shopping, you pay per click. You can set a maximum price per click (cost-per-click, cpc) and in general, if the maximum click rate is higher, your ad will be shown more frequently, and the cost will be higher. This usually means more sales, but because of the cost, less profit. Incidentally, you aren’t paying the cpc amount you set for Google. When someone searches for “Adidas Predator”, it’s Google’s job to find the most relevant ads. Then Google looks at the maximum cpc bids from providers. The combination of relevance and bid determines the ranking. If you go with $ 0.30 as the highest bid and the next offer is $ 0.20, you pay $ 0.21 per click. You always pay $ 0.01 than number two.
A lower bid means a lower cost, but it also buys you less (i.e. you’re less frequently shown). If you offer more, sales are increasing, but so does the cost. This can ultimately take the profit off of each product sold.
If your bids are too low, you’ll never be seen nor will you sell anything on Google Shopping (see chart). As you pay more, you get more clicks and initially make increasingly more profit. If the cost is as high as the profit, you’ve reached the maximum allowed bid. That is, the maximum cpc. After this you’ll be making a loss on every sale!
On Google you can only determine the maximum cpc amount. The amount you pay depends on the bid of the next competitor but will never exceed the maximum cpc.
How to determine what constitutes an ad
An analytics system like google analytics measures the revenue per ad. However, the problem of these systems is that they:
- Only measure the turnover but not the margin of products sold
- Assign the turnover to the last visit while there are more ads involved in a sale
- Do not take returns into consideration
To measure the actual yield per ad, you need an analytics system that determines the margin of products sold, then distributes the contribution margin to the visits that have contributed to the sale. This can only be done by analytics systems equipped with an algorithm-based attribution system like Google 360 or AdCurve.
How to determine the best bid
The best max cpc bid is the bid where you just barely make a profit. Because even with that bid you still make a
profit. If you know how many visits you get from each ad and what they contribute to the margin, it’s easy to determine the correct bid:
Imagine that you get in the last 30 days 1000 visits from a product advertisement and according to your attribution tool, those visits returned a margin of € 300. In that case your maximum cpc is $ 300 / 1,000 = $ 0.30. Because if you would spend more than $ 300 on advertising costs, you’d end up spending more than what it brings in margin.
With Google Adwords you can set the maximum cpc. In most cases, you’ll pay a much lower amount than the maximum cpc. You pay one cent more than the 2nd bidder. If they’ve bid $ 0.16, you appear above them for $ 0.17. To all those ads you make a good profit. If a competitor bids $ 0.28 you’ll pay $ 0.29 but still make a small profit.
AdCurve provides the max cpc for every ad on every channel.
How to set your bids
You can set a maximum cpc in AdWords for each product. Since Google’s auction system requires a minimum volume you better classify your products in bidding groups like:
- Group A products for which the maximum CPC $ 0.00 – $ 0.10
- Group B products for which the maximum CPC $ 0.10 – $ 0.20
- Group C products for which the maximum CPC $ 0.20 – $ 0.30
How to categorize products automatically?
Tools like AdCurve allow you to automatically group your products in bidding groups. AdCurve will add the group as a “custom tag” to the feed for Google Shopping. In AdWords, you can easily select the groups and set a maximum bid as shown.
You can subscribe for the webinar to see how it can easily be done with AdCurve.
Try AdCurve 30 days free!
Start today with making money! Install AdCurve and try the Google bid manager now.