Adwords Bidding Tool

Well I thought to myself, start the blog off with a simple light hearted post, something to ease readers in. Something of interest to the mass, that I can have my unique view on…..

But then I thought, why not make my first post alienate all but a select few, make 99% of the population unable to understand what I am on about – but make it USEFUL! So I took something I use day-in day-out at work (how many people will stop reading when they see it is work related I wonder)…. and figured I would let others utilise the little tool I made.

Adwords Bidding Optimisation:

Whilst being in control of www.stinkyinkshop.co.uk Adwords account, I frequently monitor and alter bidding on hundreds of keywords which we compete for. But trying to maintain an operating margin, whilst keeping competitive for a range of terms, is time consuming and not the most enjoyable of tasks.

However, whilst studying additional activities within analytics for time saving methods, I stumbled across a great idea by Brian Clifton for optimising your bidding levels. To briefly outline before going into further detail, by entering company margins and your existing adword analytics information, you can get an instant view of recommended maximum cost per click information for keyword groups. This tool, though invaluable, needed some love and attention. I didn’t just want CPC on a campaign group, I wanted to be able to manipulate individual keywords for separate margins, and get a flash point on issues of concern; for example a drop in the click through rate I had been aiming for.

The simple beauty of this tool is that you are not even limited by the assumption you want to make money! Whilst this may seem slightly moronic for an ecommerce company to not live by, it is widely understood that it is much harder to generate new custom than to maintain existing. The first interaction with the tool is the setting of your business margins.

This enables you to firstly specify the profit margin of the product/service which the adword campaign in question runs on. This enables easy editing of future changes to your CPC if your margins change, for example special offers or reaction to a competitors price drop on the aforementioned product/service. The second margin you can specify enables the selection of gross profit margin to maintain. This is the great part. Don’t mind making a slight loss at the start of your adwords campaign? Set this margin to below 100% (the value where you spend £1 to make £1), and you will get the bids calculated for you which will limit your losses to your chosen range. Contrarily, if you always want to maintain a small profit, set this to a value above 100% and the calculated values will ensure that no matter what offer your campaign bids at, you will not go below this margin.

Once the data for your existing adwords performance is entered (methodology explained in the tool, or in a demonstration video provided at end) you will get an output which will look like this:

I assure you these keywords are theoretical, and the average value for people searching for cake is not actually £197.45, otherwise I am in the wrong business.

This shows you the maximum cost of acquiring new customers through the keyword (CPA column), to give you an overall view of the expenditure you should not exceed to gain new sources for revenue. This takes into account the margins you have previously entered, so any change to your target margins or operating costs will be reflected in this value. This provides a nice insight in comparison to the cost of the product/service which you are supplying, and is worth monitoring if any huge variations are seen between keywords.

Multiplying this by the conversion rate seen on each keyword gives you a recommended value for cost per click, seen in the highest CPC column. This is the bid value for the relevant keyword which should not be exceeded, to maintain the pre-specified margins.

Due to the simple nature of putting in your analytics data, doing this every few days (or weeks depending on your adwords usage and competition level) enables the changing of average revenue and conversion rates for each keyword to be monitored and reacted to accordingly. Cakes average value dropped? We will bid less on it until its performance picks up! Cakes conversion rate through the roof? We can increase our CPC limit confident we maintain our margins.

This tool is in no way guaranteed to make you money in your adwords campaign. It just provides a time-saving method in optimising bids for keywords, and limiting your expenditure to margins you get to quickly set.

Individual keyword margins:

If you have campaigns which target differing products, and thus operate under different margins, a section has been entered to cater for this.

Returning to our cake example:

Assume this keyword is part a long list, not all relating to cake. Also, assume that cake happens to operate on more fluctuating margins than the other keywords.

This highlights manually entering the same profit margin, so our margin on Cake has stayed constant. However we wanted to change the profitability of the cake keyword, up from 125% to 140%. That extra 15p profit per £1 spent was desirable. The tool recalculates the maximum acquisition cost and CPC max bid values, unique to these margins and keyword.

Then assume our operating margin on that product changed, perhaps a drop in price meant it lowered for example. Changing the margin to 35% shows the response in the CPA and CPC, resulting in lower bids and acquisition costs to maintain the margins

These added features enable the reaction to any change in margins, whether it is short or long term, and can be applied to any exported individual keyword.

Click Through Rate and Additional Flagging:

A further feature added is the highlighting of performance per keyword. The variable most of interest to me, due to the competitive nature of our market, is the click through rate. If my keywords are getting high impressions, but not getting clicked, it indicates to me something is wrong with anything from keyword positions –advertisement phrasing – to what the campaign is offering, essentially any variable independent of what the tool is calculating, bidding information.

With the addition of Click Through rate values, you can specify the rate you are targeting for the campaign, highlighted in the following example.

In my example I have chosen a 10% click through rate as desirable. For every 100 people viewing my ad, I would be satisfied with 10 clicking through. Assuming I have set Cakes CTR as 0.09, and Is Good at 0.2 in the data set, the tool would produce:

This enables you to instantly see performance per keyword, flagging keywords to focus deeper analysis on.

The tool has the potential to incorporate any flag such as this, so you can tailor it towards any goal values you have set within analytics as a quick way to check whilst monitoring bid values, however I have left it at CTR for now. A base understanding of excel whilst viewing the conditional formats and formulas I have used will enable you to quickly add in whatever variables you wish to have outlined.

Well that concludes the outlining of this adwords bidding tool. I hope you find it helpful in maintaining keywords for your campaigns, and if you have any queries or issues regarding it, please feel free to contact me.

User Guide:

Soon to be added, a video with a detailed guide of how to use the adwords tool.

(The Original Simple version of this Workbook can found to download here: cpcmax-calculator.xls , I am in no way trying to pass this idea off as my own, full credit goes to Brian Clifton, I have merely implemented new features to the sheet and expanded upon it to benefit usability and potential)