Bids play a key role in your PLAs’ position (ad placement in relation to competitors’ ads) and frequency (how often the ad is served for qualified search queries). That’s why it is imperative that your bids strike a perfect balance between budget and impression share. Bid too high and you’ll overspend, bid too low and you’ll miss out on shoppers.

To toe this line, you’ll need to account for the following factors:

• Price - Bids should take into account the product’s price. Put simply, a $10 pair of socks should not have the same bid as a $300 pair of shoes. Use custom labels (Under10, Under50, etc.) to differentiate products and apply bids accordingly.
• Profit - Knowing your margins will help you determine whether a higher bid makes sense on a product, regardless of its price. This is especially true with accessories, peripheral items and auxiliary devices whose margins are a higher percentage despite being priced lower than the products they support. Use custom labels (LowMargin, HighMargin, etc.) to distinguish product groups based on profit margins.
• Conversion Rate - How a product performs should affect how you bid for that product’s PLA -- regardless of its price and/or margins. Strong performers (low CPA) should be rewarded with higher bids while products whose CPAs are high should be demoted. Use custom labels (BestSeller, LowSeller, etc.) to promote/demote products based on performance.

Applying “levers”

How much is a PLA worth to you? Campaign managers often use “guesstimated” bids that don’t take into consideration any of the above factors. One way to pragmatically establish bids is to use a formula like this:

1. Price - Cost = Profit
2. Profit * conversion rate = Maximum bid
3. Maximum bid * 0.5 = Minimum bid
4. Minimum bid to maximum bid = bid range

The bid range allows you to adjust bids based on business needs while working within a profitable range.

Other factors to consider:

• Performance - Products that are yielding high CTR or, better yet, high CPA should be rewarded with max bids.
• Seasonality - Products with seasonal sales cycles should be grouped so that bids can be levered up and down according to demand.
• Competition - Products with relatively low competition (namely products whose search queries are “longtail”) can be levered down while remaining competitive. Products with very high competition, however, will require higher bids to attract impressions.
• Brand - Products of the same brand can bid on based on your business’ contracts and relationship with that brand.
• Category - Bids can be set for products within the same Google Product Category.
• Product Type - Bids can be set for products labeled with the same product type (in the data feed).

Hacking your budget

Remaining competitive will require a smart bidding strategy and a workable budget. If your bids are high in relation to your budget, your PLAs will be at a disadvantage. Google estimates how many clicks will deplete your daily budget and, if all else is equal and your competitors’ budget will allow for more clicks, their ads will appear.

A way around this might be to pool your weekly budget into concentrated timeframes rather than spread out 24/7 across the whole week.

To do so, think about your target audience. Who are they? When do they shop? But don’t just guess. Look at your site’s analytics.

Then establish target timeframes. Is it weekdays 6 p.m. to midnight? Is Monday through Thursday 9 a.m. to noon?

Use the information you have about your customers’ shopping behavior to set a campaign ad schedule that will maximize your products’ impression at exactly the right times.

Next in the Google Shopping optimization series, we’ll get into campaign monitoring and feed optimization.