Case Study: Bid Changes

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As a PPC account manager, I have the pleasure of new and exciting challenges with each new client I take on. Recently, I took on a client that was the pace setter for their PPC industry. What I mean by pace setter, is that their average ad position was 1.1 for their primary search terms. While I’ve certainly taken some keywords to top position as a strategy, I had never run into a situation where someone’s ads had consistently been running in position one and had been doing so for some time.  This situation provided an opportunity to do some fairly basic PPC strategies but provided some interesting results. I thought I’d share the process with you in this case study.

Account Background:

This particular account is an online retailer. They sell a small number of products and the majority of their traffic is delivered on a few very specialized keywords. Conversion tracking was implemented just prior to us taking on the account so we did not have a lot of conversion-based data to jump into initially. Their key metric is Return On Advertising Spend (ROAS).  For the purpose of this case study, I’m going to focus on their primary keyword, which generates more than 50% of their overall PPC traffic.

Goal:

The goal of this testing was to lower their Cost-Per-Lead and their overall marketing spend. The client is less concerned about volume than ROAS so we had some room to risk losing conversions if we could continue to drive down the overall CPL and reduce marketing spend.

Strategy:

As I mentioned above, the few keywords that were generating nearly all of their traffic were set to bid point that all but ensured they would be in position one for their respected search queries. These keywords were all exact match, so they dominated the top position for their respected queries. While there are times when this strategy will work, I guessed that this wasn’t one of them. I knew right away that I wanted to run an experiment and play with it’s bid price. When dealing with a small sample of exact match keywords there are very few options for improvement within PPC. Your options basically exhaust at 3.

1.     Write new ads to improve click metrics and conversion rate.

2.     Improve quality score.

3.     Lower bids to check performance at different ad positions.

In this particular instance, quality score was 7/10, not bad, and the structure surrounding the keyword was a picture of best practices. CTR was also not an issue. Rather than moving the primary keyword into a more specialized campaign/adgroup we opted to pull the non-supporting keywords out of this particular adgroup and put them into a more specialized group, which would ideally ad some focus to the existing ad group. In the end, we didn’t see quality score move.

We also wrote new ads and continue to do ad testing so this was part of our overall strategy. We’ve seen good and bad days with new ads but our top performing ad is still the original control ad.

This leaves option 3 from the above list and that is what the focus of this particular case study surrounds. Below is a snapshot of what the account looked like when we took over. I’ve cut out the keyword for client privacy but all the key metrics are there. Please keep in mind that the gray line is the adgroup as a whole while the white line is the individual keyword I’d like you to focus on.

You can see that the keyword is averaging position 1.1 and that it’s a fairly large sample size at about 10,000 impressions and 1768 clicks. From here I started a campaign experiment and reduced the bid price on this keyword by 30%. I wanted to be a little aggressive and I wasn’t exactly sure how far in front of the competition they were with their bid price. When we started the experiment we used 90/10 control/experiment settings because I didn’t want to disrupt the ecosystem of the account too much, in the event my 30% reduction was too aggressive. After about a day the experiment sample was running around position 1.9 and initial performance indicators were good so we changed the experiment sample to 70% to speed things up a bit. Once we had a sample size we felt good about, which in this case was several thousand clicks over about 3 days, we made the decision to run with the experimental sample.

Keep in mind that during the experiment itself, the 30% lower bid was running at position 1.9. I wish I had a screen shot of the experiment but unfortunately I wasn’t quick enough to realize I’d be passing this info on to you and alas, AdWords doesn’t report on past experimental samples. Here is a screen shot of that same keyword in the days following the switch to the lower CPC:

As you can see, nearly every key metric has improved. The areas I’d like you to pay the most attention to are average position and CPC. Our average position at this new bid price has dropped to position 1.6, which is actually a slight improvement from position 1.9, which is where it was running during the experiment. I didn’t put much stock into that slight increase at the time but it turned out to be the start of a trend, and the reason behind this blog post. The CPC has also dropped considerably to $2.29 from $2.90.

The final image I’d like you to take a look it is below. This again, is the same timeframe in terms of sample size and it is the exact same keyword. This screenshot, however, is about a week in the future of the second one:

Notice that in this picture, our average position has increase to 1.3 yet our average CPC has remained almost identical, dropping only 3 cents. The significance of this change is that, being the original pace setter for this keyword, we were essentially driving up our own costs. When we relaxed our bid, the competition surely saw an increase in their average ad position without much change in their overall CPC. While it’s impossible to know exactly what happened, my assumption is that our competition in turn relaxed their bids to run in about the same position that they had been but at a lower cost. It took several days on a fast paced account for these changes to take place but in the end we only lost a few tenths of a position on the average yet we’re paying 22% less for each click. Not too shabby if you ask me. The best part about this is, we’re still the pace setter, which allows room for us to run this experiment again, which we have started today. We’re not at a statistical significance just yet but I’ll be sure to follow-up with some stats when we get there.

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  • http://www.hornswaggled.com hornswaggled

    Great write up, interested if there is any seasonality effect with this retailer.

    • Robert

      Hi Hornswaggled, My assumption is that there is some seasonality to this account but they are still heavy into their growth cycle and don’t have a baseline year of data to compare. With that said, based on the type of product, my assumption is that January will prove to be their busiest month on average and that competition in January will be at it’s strongest. It’s just very hard to prove right now because the market as a whole is on the upswing.

  • http://www.jordonmeyer.com Jordon Meyer

    Fantastic post. I love seeing this amount of detail go into writing, and especially about bid management.

    So what’s next? Did you experiment with additional match type options to capture a larger audience? Keep testing ad copy? I never think an account is perfect, even if it looks as good as this…just curious what your next move was.

    Happy bidding!

    • Robert

      Hi Jordon, This account has a number of challenges but the primary one is that their margins are extremely tight. It’s difficult to run tests that have the potential to increase their marketing spend (which is any test) yet in order to improve the account you have to do so. You’ve hit a few of the tests we’re trying already. We are adding match types but doing so with limited budgeting so as to not risk bumping our daily ROAS to a point that is not acceptable. The most obvious way to improve the account is to increase conversion rate so ad testing has been a focus but they will also benefit greatly from landing page optimization. Improving conversion rate is #1 priority.

  • http://Www.seominteractive.com Mark Kennedy

    Great case study and great post. Please keep us in the loop on the next round.

    I think you nailed it. Being the pace setter, they were probably hurting themselves a bit. My guess is that you can go even lower and still maintain a decent position and a strong ROI without sacrificing volume. At some point you’ll hit the optimum level, but my guess is that you still have room.

    Looking at the high CTR, this seems to be a very niche product. So does that mean the competition in this space is limited? Or at least the quality competition?

    I ran into a similar situation (lead-gen) and the campaign i inherited was the pace setter as well. The client was adamant about being the pace setter because he felt he had to maximize volume in the niche. However as you’ve proved you can still do that and have a lower CPC and CPL. You just have to find that balance point.

    • Robert

      Hi Mark, without divulging too much detail, this account is selling a product that is trending heavily now. I don’t want to call it a fad because I believe the product has legs but it’s relatively new to the popular market place. Competition is extreme and I feel the market as a whole is set very high in terms of the CPC/CPL we’ve seen on the account relative to the available margin on the product.

      Relaxing the market needed to happen but it wasn’t necessarily the desired outcome when I went into this experiment. I just figured I’d get in close to position 2, save some money, and still generate leads. My hope is we can have a part in lowering the market again. Loosen the bid market a bit and everyone makes more money right? I think our savvy competitors understand this concept, which is why we saw the market as a whole relax. The problem with a competitive marketplace is that some people may see this relax as an opportunity, and rightfully so, so being the pace setter can only get you so far. Eventually, you pass the torch to someone else. You nailed it when saying it’s all about finding the balance point.

  • http://www.planetbball.com Michael

    I bet Google isn’t happy about this. They are going to lose a lot of money because you were smart with your bidding. When pace setters scale back, the whole industry scales back, and AdWords makes less money. Thanks for the post!

    • Robert

      Hi Michael, thanks for the comment. The flip side to that coin is that Google has a lot more to lose by advertising like us pulling out of this advertising channel due to unreasonably high click/conversion costs. When we win, they win.

  • http://www.slowtech.blogspot.com Cara dB

    Terrific case study. I would like to replicate it in my own accounts – I’m in-house in an extremely competitive vertical where just a few keywords drive the majority of the traffic (and conversions.) My company is also the pacesetter for the industry and I suspect that I’m driving up my own prices in the quest for more conversions. (Unlike your client, I work with a high-margin product so I have a bit more wiggle room on the cost/conversion, but I still don’t want to waste money.)

    If I can ask a possibly stupid question, how did you set up the 90/10 part of it? Just two adgroups side by side or were you using software?

    • Robert

      Hi Cara DB, I actually used the campaign experiment tool within AdWords, called AdWords Campaign Experiments (ACE). It’s still in Beta but I’m fairly certain it’s available to all adwords accounts. Login to your account and click the campaign you wish to test. Go to your settings tab and scroll down. Near the bottom you should see the experiments option. When you create an experiment it will ask you for your sample size, which is where I chose 90/10.

      Once you start your experiment, if your doing bid testing, go to the keywords tab. You should see beakers on your status column. Experiment will then be part of your segment options so you’ll want to segment your data by experiment and then you can change the bid prices by a certain percentage. Here is a link from Google that should help.

      http://www.google.com/ads/innovations/ace.html

  • http://twitter.com/deepfootprints Joel Chudleigh

    Hi Robert
    This is an interesting topic and something that i have tested many times myself. However, I have come to a different conclusion as to why this happens. I believe that Google’s algorithm does not always do as it says on the can – i.e. just charge you 1p more than it takes to beat the next competitors ad rank. You will see this if you try the experiment in reverse.  If you have a keyword in say position 1.3 try bidding it up to pos 1.0. You will find that you just keep pushing and pushing, and once you are there in pos 1.0 just bid up a little more and see what happens; that’s right, Google keep increasing your average CPC without position changes. Once you have done this for a while bid down again and you will see your average CPC fall whilst you  maintain position. I believe that this has nothing to do with competitors, it is purely determined by the Google algorithm.
    Because of this I rarely bid up keywords that are in pos 1.1 – 1.9 as the position gains rarely come at an efficient ROI.

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  • http://twitter.com/sem_bangalore Pallavi

    Hi Robert Nice post, thanks for explaining the new feature, Just want to ask one issue which i face, when we pitch our client, to be more clear if you want to set a budget costing (avg cpc) for a new website, cpl for a new client who just want to be the part of it but does’t know what is digital marketing.. so how to calculate average cpc clicks..how far adword tarffic estimator is accurate.. for me it was a shock… i cant rely..please suggest me