Should You Increase Your CPC Bids to Google’s Recommendations?
If that’s your ‘Hail Mary’ move to get more leads, it will generally give disastrous results and you’ll have to revert the change.
— Adam A. Sene, CEO
We receive many questions from our PPC clients and from prospects asking us to help them understand their pay-per-click campaigns better. Here is one of them: “This campaign has the best ROI but many of the keywords are below first page bid. Shouldn’t we increase the CPC bids to match Google’s recommendations?”
So, obviously, the client is looking at Google’s recommendations (Spoiler alert: they want you to spend more) and suddenly has doubts as to the CPC bid level.
As it turns out in this particular case, the bid recommendations weren’t even that high. But in some industries, Google recommends bidding $40-$75 per click. Big G’s recommendations for attorneys and insurers reach into the hundreds of dollars… per click!
CPC and ROI
In all of our campaigns, we set our cost-per-click bids based on a number of factors, including cost/lead and ROI. If we increase bids and get worse or equal results, we lower them again.
When the overall ROI of a campaign is good, increasing CPC bids will almost always decrease ROI.
Let’s do some basic math:
Say a campaign has a 3.0x ROI, and we increase the bid from $4 to $12 (i.e. 300% increase) to follow Google’s recs. We may get more leads and even more sales. But unless the conversion rate increases, the ROI would drop from 3.0x to 1.0x because it’s not a linear increase in clicks, leads and sales.
In order to maintain a 3.0x ROI while increasing our bids by 300%, we would also have to get a 300% increase in conversion rates. This could very well prove to be impossible, especially if conversion rates are already really high.
Typically, increasing the CPC bid actually results in a decrease in the conversion rate, twice impacting your cost-per-lead.
This ain’t just theory.
Many times, I have willy-nilly tried increasing CPC bids in high-ROI campaigns based on Google’s recommendations…
I generally do it out of desperation after hitting my head against a wall to get more leads. And I generally revert the changes a week or two later when the results prove to be disastrous.
So what do I do?
I manage bids by increasing the CPC bid based on the cost/conversion of the keyword, relative to the average cost/lead of that campaign.
- If the cost/conversion of the keyword is much lower than the rest of the campaign, I increase the CPCs proportionately — up to $0.25-$0.50 above Google’s bid recommendation.
- If the cost/conversion of a specific keyword is considerably higher than average, I lower the bid.
I compare the cost/conversion of the keyword to the average for that specific campaign: if a campaign generates a good ROI, I will tolerate a higher-than-average cost/conversion compared to the rest of the account.
Keywords do very often show up on the first page, getting impressions and clicks, despite Google warning you “below first page bid”. “Impressions” and “impression share” metrics are your indicators for that.
If you are a client of ours, and you see a keyword getting no impressions in your campaign, it is almost always because of one or two factors: (1) the search volume is low; (2) at some point the keyword was spending money but generated no conversions. Then we cut the CPCs down into oblivion.