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AdWords Bidding Options
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Target CPA
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Target CPA
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By David Smania
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For Target CPA bidding, the objective is to drive as many conversions as possible for a predetermined cost per acquisition.
This automated smart bidding option utilizes Google’s advanced machine learning, campaign history, and contextual intelligence to optimize a campaign to a targeted cost.
Advertisers are still charged on a cost-per-click basis, but the clicks will be driven by traffic that has a higher propensity to convert.
With Target CPA, the cost of the click is irrelevant, as the focus is more on attracting clicks at a rate that is still profitable for the company.
This is helpful for advertisers who have spent the time calculating the true cost of customer acquisition and lifetime customer value.
This can be analyzed even further by product and service, as each offering can represent different revenue opportunities and related customer acquisition costs.
As an example, suppose you’re a dentist and a conversion is defined as a form on your website or a phone call that is configured with call tracking.
We know from the historic performance that 1 in 5 forms or phone calls result in a new patient, a 20% conversion rate.
Let’s say that each patient represents an average of $300 in profit per visit. In this case, we would need to pay no more than $60 per conversion (300 * .2) to maintain profitability.
Setting Target CPA to $60 could be a great way to drive growth within our account, allowing Google to optimize our ads for search traffic that is more likely to convert.
The Target CPA option comes with one caveat. You must have a sufficient number of conversions for Google to properly optimize your account. At the time of this writing, Google requires 15 conversions in the past 30 days.
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“With Target CPA, the cost of the click is irrelevant, as the focus is more on attracting clicks at a rate that is still profitable for the company.”
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Testing Target CPA Bidding
For advertisers with sufficient conversion history and knowledge about customer acquisition costs, choosing CPA Bidding can be an attractive option. Here’s how to test this without resetting or disrupting performance history in your existing campaigns.
1. Duplicate the campaign you want to test in the AdWords Editor.
2. Split your existing budget between the two campaigns. Use a percentage up to 50% for your second campaign. It could make sense to split it in half for proper A/B testing.
3. In your new campaign, set the Target CPA that makes sense for your business.
4. Let both campaigns run for a period of 3-4 weeks to accumulate enough data for a proper analysis to see which is more profitable for your company.
Next Up – Target ROAS
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