How to Create the Best Google Shopping Bid Strategy for Improved ROAS

Google Shopping campaigns are a powerful way to engage your customers using the world’s most popular search engine. However, many marketers end up wasting this opportunity.

Why? Although many go above and beyond to include every relevant piece of information and lots of attractive product images, they do not have any formal strategy when it comes to bidding.

How you plan your Google Shopping bid strategy can essentially make or break your product visibility, and your return on advertising spend (ROAS).

In this article, we’ll share tips on setting the right Google Shopping bid strategy and optimizing your bids to make your Google Shopping campaign a success.

How to Set Google Shopping Campaign Goals for Increased Revenue

To set an effective Google Shopping campaign goal that maximizes your revenue, you need to determine which key performance indicator (KPI) objectives are needed to get you there quickly.

Here are a few options that you may consider:

Maximize Clicks

As an e-commerce business, you may be interested in getting more clicks. That’s because a high volume of clicks can put your brand in front of a bigger audience, helping you generate revenue in the long-term. This can be an effective strategy if you are focusing on building your brand.

Boost Conversions

For an e-commerce store, the main goal is to yield a high number of conversions. This will help your brand build a base of paying customers at present, along with setting the basis for long-term success. It’s a good tactic if you have high-demand products that generate large profit margins.

Return on Ad Spend (ROAS)

Another goal could be to maximize your ROAS. In this tactic, you aren’t just focusing on the number of conversions, but you want to yield more conversions on products that generate a high return. This is a cost-effective approach, especially if you have a limited ad budget.

Factors Affecting Your Google Shopping Bid Strategy

To create an effective Google Shopping bid strategy, you need to focus on three critical factors:

• Conversion rate – Some of your products might convert better than others. So, you should consider investing more resources into high-converting products. It’s best to determine the average conversion rates for your products and bid accordingly.
• Product price – ROAS is primarily determined by the price of your product. However, many e-commerce businesses do not take into account their product price when bidding.
• Gross margin – Price is not the only factor that contributes to the profitability of your ad. You should bid higher for high-margin products than low-margin products. So, calculate basic cost margins for every product and categorize them.

 
Once you know all these numbers, use this formula to determine your maximum bid:

Maximum CPC = Product Price x Gross Margin x Conversion Rate

Want to turn your Google Shopping campaign into a profit machine? Focus on these three things:

• Set initial bids 25% to 50% lower than your maximum cost-per-click (CPC).
• Improve your pricing.
• Improve your conversion rates.

How to Use the S-Curve for a Profitable Google Shopping Bid Strategy

The success of your Google Shopping bid strategy largely depends on two fundamental variables: budget and revenue. In the graph below, you can see both these variables mapped out, with the budget on the x-axis and revenue on the y-axis.

In the context of bidding, the three stages identified in the graph are:

• Underbidding – Lower bids aren’t very effective in producing revenue. This means if you’re at the bottom of the bidding curve, you aren’t getting traction.
• Bidding Bandwidth – The value of a bid starts increasing quickly at this point.
• Overbidding – You start experiencing decreased returns on your bids. This means if you’re at the top of the bidding curve, you’re paying excessively for marginal gains.

How to Create An Effective Google Shopping Bid Strategy

Consider the following bidding strategies:

Manual Google Shopping Bid Strategy

The manual Google Shopping bid strategy involves setting your own maximum CPC for your campaign. You exercise full control of the amount you are paying for every click. However, this increased control comes at the cost of your resources.

For a large Google Shopping campaign, you will have to allocate more resources to bid management. That’s why an effective campaign structure will help you concentrate your efforts on items that have the biggest impact on your brand.

Automated Google Shopping Bid Strategy

Automated Google Shopping bid strategy allows you to optimize your advertising spend. By leveraging advanced machine learning, you can monitor your Shopping campaign’s performance and set a bid in every auction to help you accomplish your objectives.

Types of Automated Google Shopping Bid Strategy

You’ll find different types of automated Google Shopping bid strategies depending on your goals.

Goal 1

Attract the most clicks for your budget, increase site visits, or increase clicks on low-traffic products within a certain ad spend.

Automated Bid Strategy – Maximize Clicks

This will automatically set bids to get you as many clicks as possible within your chosen target spend.

Where to apply it – Campaigns and ad groups.

Goal 2

Increase conversions while staying in control of your bids.

Automated Bid Strategy – Enhanced cost-per-click (ECPC)

It can help increase conversions for manual bidding by automatically adjusting your manual bid up or down depending on the possibility of every click to result in a conversion.

Where to apply it – Campaigns and ad groups.

Goal 3

Get the most conversions or conversion value while meeting a target ROAS, which signifies the amount of revenue you want to earn for every dollar you spend on Google Ads.

Automated Bid Strategy – Target ROAS

It automatically sets your bids to maximize the conversion value while reaching your chosen average ROAS.

Where to apply it – Campaigns and ad groups.

Goal 4

Get the maximum conversion value for a given budget. You also have the option of setting a minimum Target ROAS to maximize revenue without going below a certain return.

Automated Bid Strategy – Maximize conversion value bidding.

This automatically sets your bids to maximize your conversion value while trying to spend the available budget you set.

Where to apply it – Campaigns.

Benefits of Automated Google Shopping Bid Strategy

The following are the key benefits of using an automated Google Shopping bid strategy.

Focus on High-Level Goals While Smart Bidding Sets the Right Bid

Are you trying to bring more users to your website or more revenue to your brand? Automated Google Shopping bid strategy allows you to focus more on the overall campaign performance without worrying about how to set the perfect bid for each group.

For instance, you are selling Jeans, suppose you wish to maximize your sales for the Jeans category, and you’re willing to spend US $5 for every US $100 of sales. So, you set up conversion tracking to report a conversion for every purchase where the value is the purchase amount.

Next, you set up Target ROAS as the automated bid strategy for Jeans’ campaign, with the target value of 500%. There’s no need to decide how to bid for performance optimization. The automated bid strategy will bid for you in every auction by considering how every product performs to help you meet your target.

Past Campaign Performance And Future Goals Are Always Considered

You only have to enter your campaign performance goals. The automated bid strategy you choose will respond in real-time, accounting for your campaign’s past clicks or conversion data.

For instance, suppose you want to maximize the number of clicks to the product pages on your site. So, you set an average daily budget of US$150. Next, you set up Maximize Clicks as the automated bid strategy with a budget of US$150. The bid strategy will bid for you automatically to help you get the maximum number of clicks for your budget.

Rules Guiding Your Google Shopping Bid Strategy

You need some bidding rules that guide your Google Shopping bids based on specified KPIs. These include:

Based on Conversions

• Products with wasted ad spend – Items with no conversions experience lower bids.
• One-off converters – Items converting at a low volume but a decent rate are specified as one-off converters. In this case, bids increase but not very aggressively.
• Mid-range converters – Items in the mid-range of conversion volume and conversion rate experience an increase in bids.
• High-range converters – Items with a high conversion volume and rate have an aggressive increase in bids.

Based on ROAS

• Bids on cash bleeders – Don’t spend high bids on cash bleeders, which are items that need a lot of ad spend but get low returns.
• Bids on products with high returns – Bid high on items that offer high ROAS as they provide a high value.

Based on Traffic

• Bids on products with high impressions and no or low clicks – You can increase bids on these products to generate more clicks from your impressions.
• Bids on products with no impressions – You can increase your bids on these products to generate impressions. If your bids aren’t high enough, you may not get any impressions.

SKU Level Bidding in Google Shopping Campaigns

Perhaps, you’ve got a group of best-selling or high-margin products that are consistently yielding significant conversions. You need to give special attention to these star products and better control their bids. That’s where SKU level bidding comes handy.

SKU (also known as Product ID or Item ID) level bidding empowers you with greater control on your bidding strategy by placing bids on the product level versus general product characteristics like category, brand, or custom labels.

For instance, you can create an SKU level campaign for the following categories:

• Best Sellers
• High Margin
• High ROAS

 
Next, place a separate bid for every SKU in your campaign. Use SKU level bidding on a selected group of items to closely monitor items that generate maximum profit.

Product Attribute Level Bidding in Google Shopping Campaigns

SKU level bidding isn’t suitable when you have limited time. That’s when you should use product attribute level bidding.

Here’s how you can segment your inventory based on product attributes:

• Seasonal products – Suppose the demand for your items gets high during certain seasons. During these seasons, the bids of your competitors on these products will go up. You should be agile and react with bid changes when needed.
• Promotional products – In case of ongoing promotions for specific items, you should move the inventory as soon as possible. There should be a separate bidding strategy for promotional products.
• Low margin products – If you’ve got items that don’t generate money but bring awareness and help sell other items, you should create a separate segment and bidding strategy.

Remarketing Audience Level Bidding in Google Shopping Campaigns

Many customers don’t purchase the first time they click on your ad. Instead, they look around, compare products, prices, and value propositions. This is where Remarketing Lists for Search Ads (RLSA) bidding enters the scene, as you can use Google Shopping campaigns to remarket to previous visitors.

You can use it to target your past visitors or consumers when they search for products again. However, your visitors and previous customers are two different segments, so you should target them differently. For example:

• All Visitors – Any visitor who has ever visited any part of your site.
• Product viewers – Visitors who have seen a product page on your site.
• Cart Abandoners – Visitors who placed an item in their cart, but departed before buying.
• Previous buyers – Users who have bought from you in the past.

 
With RLSA campaigns, you place higher bids within your campaigns to different audiences. This ensures you have a better chance of driving traffic from potential customers. For instance, you may be willing to bid higher to draw in visitors who abandoned your cart versus those who just visited your site.

Manual vs. Automated: Which Bid Strategy Should You Choose?

Manual Bidding

Manual bidding involves managing your bids right from Google Ads. This means you can increase or decrease your bid based on several factors like product performance or ad position.

Pros of Manual Bidding

• Fast response – The ability to quickly respond to the ever-evolving online environment is a significant benefit. For example, suppose while monitoring your Ads account, you observe that performance has suddenly declined. You generate an Auction Insights report and conclude that new competitors have been pushing CPCs to increase. So, you quickly push bid changes for the items that are low-performing to tackle this situation.
• Control – You can bid on the individual product level and decide how aggressive you want to be with your bids at the most specific level.
• No delay in changes – Your changes are in effect without delay.

Cons of Manual Bidding

• Large accounts are challenging – Huge spending accounts that include tons of products are challenging to manage on a granular level effectively.
• Potential for inefficiencies – Having a day-to-day view of the account can prevent you from looking at the “bigger” picture. Also, there’s the risk of error due to the human component.
• Time-consuming bidding – Adjusting bids manually can be a slow and challenging process.
• Limited segmentation options – You are limited to a specific account structure if you wish to bid individual campaigns or ad groups similarly.

Automated Bidding

Automated bidding gives control to an algorithm to selectively choose the most optimal bids. There’s an option to adjust targets within bidding folders -by campaign or by ad group.

Pros of Automated Bidding

• Versatile segmentation – You can segment your campaigns and ad groups based on similarity and categorize them into custom folders, which you can then bid separately.
• Efficiency – You can manage large accounts on a macro level, concentrate on growth prospects or account strategy, and monitor day-to-day performance.
• You can easily manage large or complex accounts with thousands of products to manage large or complex accounts.

Cons of Automated Bidding

• Traffic and conversion volume – Automated bidding is not recommended before your account has decent traffic and conversion volume.
• Automation still needs monitoring – You still have to actively monitor your account to ensure these tools are effectively performing the way you intend them to.
• Aggressive changes – You shouldn’t be overly aggressive when adjusting targets as algorithms need time to develop. Sudden big changes may have a negative impact on performance.

 
Overall, automated bidding is a temporary solution that gives mixed results. You may opt for it if you’re running a smaller account with limited campaigns. However, manual bidding is the best long-term solution for most business accounts. It all depends on your needs/goals.

6 Tips to Create an Effective Google Shopping Bid Strategy

Here are six proven tips for building an effective Google Shopping bid strategy:

1. Segment Campaigns Based on Intention

Lack of segmentation can negatively impact your Google Shopping campaign. Overlooking the intent of different segments when searching for different products means you’ll end up showing irrelevant products. So, understand what your customers are seeking when they look for your products. This will help make your bid strategy cost-effective.

2. Decrease Bids Where Ad Spend Is Wasted

When you place bids for certain categories and rarely revisit them, you can end up wasting ad spend. So, set a rule that lets you know when money is being wasted so that you can reallocate it elsewhere.

3. Plan When Bids Should Be Increased

Specify rules when you should increase your bids. This includes segmenting your converters by three descriptors:

• Mid-Range – Filter out repeat converters and increase your bids for each, as long as they meet your cost-of-sales goal.
• Top – Use a bid-stacking strategy with items that give the highest ROAS so you can upsurge your profits.
• One-Off – Establish a bidding strategy that strikes the right balance between giving these items sufficient exposure and not spending on them as if they were a mid-range product.

4. Don’t Give Up on Products with Zero Impressions

Some of your products may not have received any impressions over the past month. Instead of reallocating all your money elsewhere, assess the competition in that item’s field.

5. Increase Your Bids During Any Promotion

Whenever you run a promotion, it is absolutely essential that you also increase your bids on the products you’re promoting. Even though the sale means your profit margins will drop, you’ll see a lower overall ROI if you’re not increasing your bids and, thus, increasing exposure and sales.

6. Test Your Bids

Increasing your bids by a small percentage can result in significant increases in revenue and profit. So, continually test bids to find the best balance. Break down your campaigns on a weekly and hourly basis to see how much your conversion rates change by both of these metrics.

You need to apply the right bid modifiers to spend more on the traffic that converts the most. Also, consider using geo-targeting bid modifiers to invest more in clicks from areas that perform the best.

Wrap Up

By implementing these tips, you should see a significant increase in your Google Shopping campaigns’ performance in terms of conversion rate, revenue, and profit.

With an effective Google Shopping campaign bid strategy in your arsenal, you can enjoy an unmatched competitive edge by taking full advantage of one of the most cost-effective forms of advertising available across your company’s entire product line.