Our previous post discussed keyword level and portfolio level analysis. In this post, we will dive into a keyword level strategy called incremental bidding. Utilizing this strategy is a simple way to optimize each individual keyword and achieve a lower cost-per-acquisition (CPA).

Tell Me about Incremental Bidding

With incremental bidding, you compare each keyword's CPA to your overall CPA goal. Based on how the keyword performs relative to the overall CPA goal, you can adjust the bid, which affects the position. The objective is to test different positions until you find the keyword's optimal position. Below is an illustration of how to analyze performance and adjust accordingly:

Give Me a Real Life Example

We are running a search campaign selling TVs with a $50 CPA goal. We selected $50 as the CPA goal since it is close to our profit margin. Let us look at how we would adjust the keyword bids based on the performance using the incremental bidding strategy:

Keyword CPA < Goal CPA

• Flat screen is performing well at half the goal.  The keyword is close to the top position and increasing the bid will have little impact.  As a result, we should keep the existing bid.
• LCD is also performing well, but is currently in position 5.  With a higher bid, this keyword can rank higher on the page, drive more clicks, and possibly bring in additional sales.  We should try increasing the bid by 10% - 30% to see how it affects performance.  This range is just a suggestion.  You can experiment with the percentage increase depending on how aggressive you are.

   

  Keyword CPA close to Goal CPA (+/- 5%)

   

  • Plasma is at 95% of the CPA goal.  Since it is performing well with its current bid and position, we should leave the bid as is.  If we increase the bid to improve the position, the keyword will most likely exceed the CPA goal.

  Keyword CPA > Goal CPA

   

  • LED is at 114% of the CPA goal.  By lowering the bid by 10% - 30%, this keyword CPA may fall below the CPA goal.
  • Tube is performing at 5 times the CPA goal and needs immediate attention.  We can look at adding negative keywords, improving landing page relevancy, turning off phrase or broad match, or drastically reducing the bid.  If none of these work, we should consider pausing or removing the keyword altogether.

  I like the strategy! How do I implement?

  Implementing this strategy is simple, which means you can start optimizing your keywords immediately!

  To get started, import your keyword performance data from Microsoft adCenter into Microsoft Excel. If you are tracking actions or conversions through adCenter, you should include these in your report. If not, you will need to match your conversions with your keywords separately.

  Once your data is in Excel, you can analyze your keywords using Excel filters. You will need to add two columns, one titled "CPA" and another titled "New Bid". In the CPA column, divide the keyword cost by the number of keyword conversions or actions. You can now filter by following the chart above. First, filter by the CPA and then filter based on the position. Once you finish filtering a group, take your existing max bid and either increase or decrease it based on how the keyword performed. Enter this value in the New Bid column.

  After determining your new bids, implement the changes and check back later to see how performance changes.

  Pros and Cons

  There are pros and cons to the incremental bidding strategy. The advantage is that you can optimize your keywords to achieve a lower CPA. The disadvantage is that it can take weeks to months before you reach close to an optimal position for your keywords.

  Due to the constant change in the marketplace, you will need to continue using this strategy to make sure your campaign performs efficiently. The frequency depends on how many impressions and clicks your keywords receive. If you have several high volume keywords, you will have enough data to run through the analysis every 1-2 weeks, while if you have low volume keywords, every 3-4 weeks is sufficient.

  In our next post, we will discuss another effective keyword level strategy where you make bid decisions based on sales data.