Managing CPAs for maximum results
October 5th, 2009 | Published in Google Conversions
On average, advertisers using Conversion Optimiser see a 21% increase in conversions while decreasing their CPA by 14%*. However, to get the best results for your business, you will need to set your maximum CPA (cost-per-acquisition) carefully, potentially trying a few different CPAs before deciding what level works best for you.
*This analysis compares the performance of Conversion Optimiser campaigns with a control set of campaigns and represents the average impact of Conversion Optimiser. The actual impact will vary from campaign to campaign
How do I decide on a maximum CPA?
In order for your business to be profitable, you will have a maximum amount that you can spend on each sale or lead before advertising costs exceed the value from the successful conversion. This is your break even point.
Take time to work out how much you can, or are willing to, spend securing conversions, while still returning a profit. Once you know this, you can set a maximum cost-per-acquisition (CPA) bid and Conversion Optimiser will manage your CPCs for maximum results. There's no hard and fast rule when setting CPAs - but you will know your business best.
How can I maximise conversions and ROI?
Setting a maximum CPA is similar to setting a maximum CPC in that you can restrict the traffic you are getting for a campaign if your CPA is set too low. If you find that you are getting fewer conversions than you would like, try increasing your maximum CPA in small increments. Let Conversion Optimiser run for a few days at a CPA level that you want to try and monitor the results by seeing how many conversions you get at this new cost, and how much profit you make at this new level.
Remember, the lowest cost-per-acquisition may not always lead to maximum profits for your business. If you can get more conversions at a higher price-per-conversion, do the total additional profits outweigh the additional costs?
A simple example...
Say you make €10 profit on each t-shirt you sell before AdWords costs. If your average cost-per-conversion is €2, and you are getting 100 conversions per week at this cost, then you would make €800 profit on the sale of t-shirts after advertising costs.
However, if you raise your maximum CPA to get an average cost-per-conversion of €3 you get 200 conversions per week, because by bidding more you get more conversions. You would then make a profit of €1,400 after advertising costs.
Let Conversion Optimiser run for a few days at each CPA level that you want to try, then monitor the results.
Do I focus on specific problem areas?
As CPAs are set at the ad group level, changes to the maximum will affect all keywords in the group. If you find that some of your keywords are performing well at your current CPA, but you would like to improve the performance of others, you may consider breaking out your ad group into smaller groups.
Try leaving your top performers in the current ad group and placing some of the weaker keywords into a new ad group within the same campaign. Now you can adjust your CPA on your top performers to get additional conversions, while monitoring and tweaking keywords with less traffic to ensure that they are profitable for you.
Remember, the lowest cost-per-acquisition may not always lead to maximum profits for your business. If you can get more conversions at a higher price-per-conversion, do the total additional profits outweigh the additional costs?
A simple example...
Say you make €10 profit on each t-shirt you sell before AdWords costs. If your average cost-per-conversion is €2, and you are getting 100 conversions per week at this cost, then you would make €800 profit on the sale of t-shirts after advertising costs.
However, if you raise your maximum CPA to get an average cost-per-conversion of €3 you get 200 conversions per week, because by bidding more you get more conversions. You would then make a profit of €1,400 after advertising costs.
Let Conversion Optimiser run for a few days at each CPA level that you want to try, then monitor the results.
Do I focus on specific problem areas?
As CPAs are set at the ad group level, changes to the maximum will affect all keywords in the group. If you find that some of your keywords are performing well at your current CPA, but you would like to improve the performance of others, you may consider breaking out your ad group into smaller groups.
Try leaving your top performers in the current ad group and placing some of the weaker keywords into a new ad group within the same campaign. Now you can adjust your CPA on your top performers to get additional conversions, while monitoring and tweaking keywords with less traffic to ensure that they are profitable for you.
I need a lower CPA to remain profitable, what impact will this have?
Say you need to lower your current cost-per-conversion for some products to maintain profitability. In this case, gradually reduce the Ad Group max CPA over time and monitor the results. You should expect to see a decrease in traffic, clicks and conversions as you lower your max CPA. However, each conversion should fall to or below your desired cost level.
If you are not meeting your campaign's daily budget, but are willing to do so, then you can try raising the max CPA for some of your ad groups. This lets you see how many more conversions are available at the higher CPA level.
Alternatively, create a new ad group, with new keywords, for your campaign. Conversion Optimiser allows you to test broad match keywords to see what your potential customers are searching for, while still looking to only show your ads when a conversion is likely. Using the search query report, find out what specific keywords are leading to conversions and add these directly to your campaign for maximum results.
Alternatively, create a new ad group, with new keywords, for your campaign. Conversion Optimiser allows you to test broad match keywords to see what your potential customers are searching for, while still looking to only show your ads when a conversion is likely. Using the search query report, find out what specific keywords are leading to conversions and add these directly to your campaign for maximum results.
To learn more about Conversion Optimiser visit this website, where you can find out how to activate Conversion Optimiser in your AdWords account today.
Posted by Faustina Clifford, Google AdWords Team.