Learn the factors that are more important than ever to optimize for automated PPC.
PPC management has developed into a more automated process and because of that there are some tricks for setting some campaigns apart from others who have access to the equivalent automation tools. Average results are accessible to all thanks to machine learning.
Two factors many may not have optimized before have now become acutely important: how you convey your goals and how you report conversion values.
PPC Optimization Shift
Optimizing goals and conversion tracking may not be the PPC optimization tasks you have cherished. But now they’re taking on the same value that advertisers are accustomed to, like selecting keywords, making bid adjustments, and doing ad optimizations.
Think about the machine as a new hire. To have new team members perform at their peak, you instruct them on the basics of your business. What is the end goal, and what metrics do you use to measure the outcomes? Machines benefit from this instruction and it is more likely they will produce the sort of results desired.
Value-focused PPC optimization
Google Ads is an ad platform that delivers advertisers ways to manage goals and value reporting. Here is how to use these to better teach machines what to do.
A catalog comprised of thousands of products is front and center at a retailer, and their goal is to improve profits. Keep in mind that the target ROAS should be just a setting the advertiser utilizes to accomplish their true goal of profitable PPC.
There are two basic ways to direct the machines towards this profitability goal, and both have to do with aiding the machines in understanding the advertiser’s break-even point:
- 1. In the first scenario, the advertiser has many campaigns, each with a different tROAS target based on profit margins. They also use conversion tracking to report the order value of each sale.
- 2. In the second scenario, they maintain just one campaign with a single tROAS. They report profit value through conversion tracking.
Scenario 1: optimize the goal to achieve profitability
There is a lot of structural granularity, and performance is optimized by setting separate targets for different elements, e.g., by setting a separate tROAS for every campaign. This is very parallel to what advertisers used to do in the days of manual bidding, where each ad group or keyword had its own bid.
Advertisers set different tROAS goals to help achieve profitability for their existing account structure and using their current conversion tracking setup.
The tROAS goal of each campaign is a factor of the average profit margin for the products in the campaign. A campaign with higher-margin products can break-even at a lower ROAS than a campaign with lower-margin products.
Because conversion tracking reports the value of the order, the margin-based tROAS steers the campaigns towards profitability. For example, the campaign selling products with a 50% margin can break even at a 200% ROAS. So a $100 order in that campaign equates to $50 of profit. Because of the 200% ROAS target, the campaign should return roughly $2 in sales for every advertising dollar spent, or it can spend $50 to get the $100 sale. So $50 was spent on ads to get $50 in profits from a $100 sale. The campaign breaks even. Goal achieved!
Scenario 2: optimize conversion values to achieve profitability
For this to work well, it assumes advertisers do a good job conveying the correct value they receive from conversions.
Advertisers achieve profitability by changing how they report conversion values and deploy a flatter account structure.
When advertisers use conversion tracking to tell Google how much profit they get from a conversion, then any performance at or above the 100% ROAS target will be profitable. If, on the other hand, the advertiser reports the order value rather than the profit of that order, a 100% tROAS won’t deliver good results because it will treat sales of high and low margin products the same.
Continuing with the example from scenario 1, if the $100 sale resulted in $50 of profit and that $50 was reported as the conversion value, then the 100% tROAS of the campaign means that the system can spend $50 to get that sale. It’s the same result as in scenario 1, but using different settings to achieve it.
Reporting profitability through the conversion value field has the added benefit that it optimizes for scenarios where a user buys something else than what was in the ad they clicked on. It handles the issue of users jumping between products of different margins once they reach your site from an ad.
Optimize both goals and value reporting
Both scenarios above are utilized to achieve an advertiser’s true business goal: deliver profitable PPC clicks. But either implementation is limited because it doesn’t take full advantage of all the ways you can teach the machines what you truly want.
Here is a third scenario where advertisers leverage both controls: the target will reflect a true goal, and the value will reflect a true measure of contribution.
Advertisers optimize both goals and conversion values to increase their level of control over automated PPC.
Advertisers with granular account structure and optimized value reporting are in the best position to teach the machines about their business goals.
For example, they can set individual profitability goals for distinct business lines. An advertiser might notice that patio furniture is nearing the end of the season and that it’s better to forego profitability in exchange for not being stuck with unsold inventory in winter. Granular account structure allows them to treat different items with different goals.
But because they also report the true business contribution value of a sale of a deck chair, when they say they are okay with breaking even rather than making a profit on that sale, the automated bidding process can set a good bid, meanwhile continuing to optimize other parts of the account towards higher profits.
Take a look at implementing a strategy that optimizes PPC with an account structure that supports setting correct business goals and reporting conversion values that reflect the true business value.
- 1. Conversion adjustments let advertisers restate the value of a conversion with a transaction ID.
- 2. Conversion value rules (beta) lets advertisers build rules to modify the reported value based on criteria like audience, location or device.
Conclusion
Optimizing PPC in an automated world proves to be ever more important and you must know how to set high-level inputs teaching machines about the businesses. By better communicating true industry goals and the value a business derives from a conversion, the machines can be trained to prioritize the right types of conversions at the right cost. Achieving this, you can deploy a mix of solutions like Optmyzr’s tools for creating advanced account structures that align with business goals and free tools from Google for fixing conversion values once you know more about the quality of a conversion.