Get ready, retailers. On June 30th, Google will be retiring its cost per acquisition percentage (CPA%) bidding strategy for PLAs. So what does this mean?
What is CPA% bidding?
Historically, Google marketed CPA% as its maximized conversion option. Google automatically sets a CPA% target based on a maximum cost per conversion or value amount. A CPA percentage target is calculated by subtracting overall cost from sales. Google uses historical conversion data to predict the likelihood that ads will convert, and then sets CPA% targets at the ad group or campaign level.
The advantage of a CPA% bidding strategy is a retailer can set it, and forget it. The main benefit being the time saved in managing campaigns. Retailers can set a CPA% bid and leave Google to optimize it.
The disadvantages of a CPA% bidding strategy are two-fold. First, retailers leave money on the table with broad spend allocation. Second, consistent performance requirements limit your flexibility. CPA% campaigns are slow to react or anticipate sudden changes in performance because Google is only looking backward at a 30 day window. This prevents seasonal or new product campaigns from even using the model.
What is cost per click (CPC) bidding?
A CPC bidding strategy is also known as Google’s maximized click option. A retailer decides how much they would be willing to pay for someone to click on a text or product listing ad (PLA), and then Google determines the actual cost that will be paid based on that retailer’s quality score (QS) and ad rank. Max CPC’s can be set at the keyword, product target, ad group, or campaign level.
The first advantage of a CPC bidding strategy is the level of granularity this model provides. Retailers can precisely allocate spend in order to optimize return. Second, retailers can quickly adjust traffic volume to anticipate or react to sudden performance changes.
The one disadvantage for the CPC bidding strategy is that granularity can potentially lead to scalability issues. Retailers can be stuck with a multitude of bids that have to be adjusted regularly so targets can be met.
What’s the right bidding strategy?
At Adlucent, we recommend retailers meet in the middle to maximize conversions and clicks. We take a portfolio approach by optimizing CPC bidding strategies in order to achieve a CPA% goal. This provides granularity and flexibility with a CPC model, without sacrificing return. In fact, when we transitioned one Adlucent client from a CPA% to a portfolio CPC strategy, clicks increased 55%, revenue increased 71%, CPA dollar amount went down 11%, and the CPA percentage amount decreased 7% year over year.
Keys to a successful migration from CPA% to CPC
With the June 30th deadline around the corner, it’s important for retailers to start planning their transition from CPA% to CPC now. Here are a few steps to get you started:
- Start by creating a plan to transition traffic from CPA% to CPC
- In order to prevent traffic from crashing, slowly decrease traffic from CPA% campaigns, by lowering their goals over time
- Closely monitor this traffic for top queries to ensure that the new CPC campaigns are catching all relevant impressions
- Allow two weeks to a month for a full transition
- Plan ahead for seasonal events
You can also contact Adlucent for assistance with making the transition from CPA% to CPC. Click here to speak with an expert today.