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Google AdWords

How to Use Target CPA Bidding to Win Conversions on Google AdWords

Hypothetical Situation:

Last week, your friend pranked you, making you look like a borderline national embarrassment. You have no choice but to return the favor. Lucky for you, that same friend texts you today saying that he’s coming over. Aha! This is your chance – don’t screw it up.

You place the camera down in the right spot and hide in a giant pile of leaves. You see him walk towards the car and…

Prank-giphy
Source: Giphy

There’s no better feeling than a perfectly executed (and somewhat harmless) prank – preceded ONLY by a perfectly targeted AdWords campaign of course. You can implement the Target CPA automated bid strategy to automatically optimize your bids to drive your designated conversion goals.

I’ll admit that analogy was a bit of the stretch, but it’ll all be worth it. Let’s dig right in.

What is Target CPA Bidding?

Formerly known as Conversion Optimizer, Target CPA bidding is one of several automated Smart Bidding Strategies provided in AdWords. It optimizes your bids so you can get the most conversions for a target CPA (Cost-per-Acquisition) that you set as a goal.

So, if you’ve found that you can pay up to $2 to acquire a customer and have margins leftover to cover your costs, you’ll select a target CPA of $2 and Google will do its best to optimize your bids to reach that goal.

Target-CPA-screenshot

How does Target CPA Bidding Work?

Continuing with the example above, let’s say you’re selling organic almond milk. If it costs you $4 to produce, ship, and pay salaries per carton of milk and your sticker price is $6, then $2 is the absolute most you should be willing to pay to acquire a customer in order to break even. Your maximum target CPA would be $2.00.

AdWords will use historical data, along with Google’s contextual signals like device type, time of day, physical location, remarketing lists, and browser types to find almond milk drinkers who are ready to make a purchase. These data points help predict optimal opportunities for you to hit that budget goal, by showing your ads for search queries and at times they are most likely to convert.

If you’ve properly set up conversion tracking, AdWords will take note of how many conversions your ad drove and how much revenue it has generated. Once your ads start running, your total average Cost-per-Acquisition will be reported on AdWords as the Effective Target CPA.

You can also use Target CPA bidding as a portfolio strategy, which means that it can be applied to either a single campaign or across multiple campaigns at the same time.

When Should You Use Automated Bid Strategies?

The thought of AdWords managing your entire ad spend is a scary thought (rightfully so), which is why it’s important to know the right situations to implement automated bid strategies.

Automated bid strategies come in handy when you’re bidding on large volume keywords, and if you have a large budget but not much time to manage each individual campaign.

However, if you’re a smaller advertiser, your campaigns might need more care. In that case, manual bidding is the way to go.

Worried About Spend? Adjust your Bid Limits

AdWords claims that setting bid limits will create fewer opportunities for your ads to show up when they need to. BUT if you’re on a limited budget and want to monitor your bids closely, you can set a max and minimum bid limit so that Target CPA Bidding doesn’t overspend on an unnecessary bid. The only downside to setting a bid limit is that your ads will now only be qualified to show up on Search.

You may also set a maximum and minimum bid limit, but AdWords might alter your minimum bid due to AdWords’ global optimization setting called smart pricing.

Set Your Device Bid Adjustments

You may also optimize your bids depending on what device performs the best. Unlike traditional bid adjustments, though, device bid adjustments adjust the value of conversions you’re aiming for, rather than raise or lower the bid themselves.

Two Things Before Setting Up Target CPA

But Jon! What happens if Target CPA is not set up correctly? Could I be wasting money because Google’s algorithm is trying to trick me into spending more?

Don’t freak out just yet! As I mentioned earlier, Automated Bidding comes in handy for big-budget and larger campaigns that requires less granular care. It must be said, though, that they are not 100% fool-proof, so be sure to proceed with caution and closely monitor your ad spend as you would with any other campaign.

To minimize your risk of a major boo-boo, be sure to:

  1. Set up conversion tracking properly. If you haven’t done so yet, check out our tutorial on how to quickly set up conversion tracking.
  2. Since Target CPA requires an analysis of historical data, you need at least 30 conversions in past 30 days for this bid strategy to run.

How to Set Up Target CPA

Now that you’ve got a solid grasp of what Target CPA bidding is, let’s go through how you can set it up. You can either follow the step by step instructions below or watch our quick video tutorial on how to get started.

  1. Open AdWords
  2. Select a Campaign
  3. Click Settings Tab
  4. Click on All Settings
  5. Scroll Down to Bid Strategy
  6. Click Edit
  7. Click Change Bid Strategy
  8. Select drop-down menu and select Target CPA
  9. Enter Target CPA
  10. Optional: Click the “Create New Portfolio Strategy” radio button to implement Target CPA across multiple campaigns, ad groups, or ads.
  11. Click Save

Review Your Performance with the Target CPA Simulator

Once you’ve run your campaigns, you can review your performance using Google’s Target CPA Simulator tool, which tells you how you could have performed if you had set different CPA targets.

To access the simulator campaign, all you have to do is:

  1. Open AdWords
  2. Click a Campaign or Ad Group
  3. Click the upwards graph 📈 icon. If you’ve selected a campaign, it will be located under “Budgets.”

Have Any Questions?

Thanks for reading! If you have any questions, please feel free to drop a comment or tweet at us @AdHawk. We read every tweet!

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About the Author

Journeyman of the wild wild west of Digital Advertising. Also doubling as an unofficial Taco Bell ambassador. Tweet at me @JonJmPark