How to determine bidding strategies for google shopping campaigns

Last Updated / Reviewed: Feb 15th, 2023

Execution Time: ~10 – 20 minutes

Goal: To determine the right bid strategy and optimize the cost and performance of your shopping campaign.

Ideal Outcome: The key is to find the best bidding strategy for your business and continually monitor and adjust it as necessary to achieve the best possible results.

Prerequisites or requirements: Refer directly to Environment setup for the next steps if you are new to this.

Why this is important: Bidding too low can mean your ads are not delivered, and bidding too high can be a losing business model. When you have all the different campaigns prepared, the optimal bidding strategy will help you achieve your objective campaign goal with the maximum result while staying cost-effective.

Where this is done: In Google Ads.

When this is done: Whenever you launch a Google shopping ads campaign.

Who does this: Digital marketers or advertising professionals who are experienced in using the Google Ads platform.

Environment setup

[MUST-HAVES]

1. Set up a Google Merchant Center: SOP 213: How to set up Google Merchant Center
2. Set up a Google Ads account: SOP 014: Creating a Google Ads account
3. Link Google Merchant Center with Google Ads: SOP 219: How to link Google Merchant Center to Google Ads account
4. Prepare your Google Merchant Center feeds: SOP 218: How to set up Google shopping data feed
5. Claim and verify your website on your Google Merchant Center: SOP 214: Verify your website on Google Merchant Center
6. Set up shopping campaigns in your Google Merchant Center: SOP 216: Set up Performance Max for Google shopping

[OTHER PREPARATIONS]

1. Calculate Returns Of Ad Spend (ROAS): Google Shopping Campaign Profit Calculator.

Where to set up and edit bidding for your Google shopping campaigns in Google Ads

1. Sign in to your Google Ads account here. Choose the appropriate Gmail account and log in with your password. Click “Next”.
2. In the page menu on the left, select “All Campaigns”.
3. Click on the “+New campaign” button. A mini pop-up will appear where you can select “New campaign”.
   1. Next, select “Create a campaign without a goals guidance” when choosing your objective for the campaign.
   2. Select “Shopping” as your campaign type and hit “Continue”.
4. Next, set up your conversion goals by clicking “Add goal” and selecting the country where your products are sold, as seen below.
5. For new users, it is recommended to select “Smart Shopping campaign” for Google to automate your bidding strategy (refer to chapter “Strategy 1: Smart Shopping or Performance Max (Automated by Google)“). For users who want to pick their own bid strategy (refer to chapter “Strategy 5: Manual CPC”), go for the “Standard shopping campaign”. Hit “Continue” to proceed.
6. Next, after filling up the campaign's general details, such as name and other additional settings, go to the “Bidding and budget” section and place your bids here. Refer more to the chapters later of different bidding strategies.
7. Next, go to “Settings” on the left, scroll down to the “Bidding” section on the right, and hit “Change bid strategy”.
8. From here, you can adjust your bid strategy for your existing campaigns.
9. Lastly, you can view your bid strategy status under “Campaigns”.

Strategy 1: Smart Shopping or Performance Max (Automated by Google)

Recommended for: New businesses or consultants who do not have time or expertise to optimize bids for their shopping campaigns.

Strength of Recommendation: Low to medium.

Objective: To automatically optimize shopping campaigns and drive maximum conversions while minimizing the cost per conversion.

Advantages: Saves time and effort to set up a bid strategy.

Disadvantages: Data on the shopping campaign performance, search query, and product performance will not be provided for further analysis and future optimization. The addition of negative keywords is not permitted. Overall, an automated bidding strategy will not let you know what is working and what isn’t working.

Bid strategy(s): Smart Shopping uses automated bidding strategies to optimize for the best possible performance. Smart Shopping combines manual and automated bidding. To take one step further, you may consider Performance Max which uses machine learning to optimize for conversions and brand awareness, lead generation, and other business goals using exclusively automated bidding.

In bid settings:

1. Following the steps in chapter “Where to set and edit bidding for your Google shopping campaign in Google Ads”, choose “Smart shopping campaign” under the campaign subtype. If you have a specific performance goal, add a target return on ad spend (ROAS) (refer to chapter “Strategy 2: Target ROAS”). The campaign will use it once it has enough conversion data.
   1. Enter your daily budget.
   2. Select a bid strategy in the drop-down menu. This includes either maximizing conversion, maximizing conversion value, or maximizing clicks.
   3. [Recommended] Add a targeted ROAS. To calculate your ROAS and campaign profitability, go to the Google Shopping Campaign Profit Calculator.

Strategy 2: Target ROAS

Target return on ad spend (ROAS): This alters your bids to get the best conversion value. With this option, you will set an average return on ad spend that you would like to achieve, and Google will work toward this goal.

Recommended for: E-commerce businesses that sell products online and want to maximize the value of their advertising spend. It is particularly useful for businesses that clearly understand each conversion's value and want to achieve a specific return on ad spend.

Strength of Recommendation: Medium to High.

Objective: To maximize the conversion value while achieving the target ROAS set by the advertiser.

Advantages: By setting a specific target ROAS, the algorithm will automatically adjust bids to ensure that advertisers achieve their desired return on investment.

Disadvantages: It requires a clear understanding of the value of each conversion or previous data on conversions. Additionally, the Target ROAS bid strategy may not be the best choice for businesses focused on other goals, such as maximizing click-through rates or building brand awareness. In such cases, other bid strategies may be more appropriate to build brand awareness before the Target ROAS bid strategy. This is so that you can have enough conversion data (at least ~50-100/month) for Google Ads to adjust your bids automatically.

Bid strategy: The Target ROAS bid strategy is an automated bidding strategy based on a target return on ad spend. Advertisers set a target ROAS, and Google Ads uses machine learning to automatically adjust bids to maximize the conversion value while maintaining the target ROAS. Consider giving the bid strategy 15 days to run before you evaluate its performance.

In bid settings:

1. Following the steps in chapter “Where to set and edit bidding for your Google shopping campaign in Google Ads”, choose “Smart shopping campaign” under the campaign subtype. Add a target return on ad spend (ROAS) under “Bid settings”.
   1. Enter your daily budget.
   2. Select a bid strategy.
   3. Add a targeted ROAS. To calculate your ROAS and campaign profitability, go to the Google Shopping Campaign Profit Calculator.

Strategy 3: Maximize Clicks for brand awareness or new campaigns

Maximise Clicks: This sets your bids to obtain the maximum amount of clicks possible for your target spend.

Recommended for: Businesses focused on driving website traffic and increasing the number of clicks on their ads. It is particularly useful for businesses with a limited budget who want to maximize the number of clicks they receive within that budget.

Strength of Recommendation: Low to medium.

Objective: To generate as many clicks as possible within the budget provided by the advertiser.

Advantages: Help businesses get more ad clicks without manually adjusting bids daily. Additionally, it is a good option for businesses with a limited budget because it helps them maximize the number of clicks they receive within that budget.

Disadvantage: It does not consider the quality of clicks. While it can help businesses get more clicks, it does not necessarily guarantee that those clicks will lead to valuable conversions or sales.

Bid Strategy: An automated bidding strategy designed to increase the number of clicks on ads. Advertisers set a daily budget, and the algorithm adjusts bids to maximize the number of clicks within that budget.

In bid settings:

1. Following the steps in chapter “Where to set and edit bidding for your Google shopping campaign in Google Ads”, choose “Smart shopping campaign” under the campaign subtype followed by “Bid settings”. Under “Bidding”, select “Maximize clicks” in the drop-down menu and set a maximum cost-per-click bid limit.

Strategy 4: Maximize Conversions

Maximize Conversions: This sets your bid strategy to generate as many valuable conversions as possible within a given budget.

Recommended for: Businesses focused on increasing the number of valuable conversions on their website.

Strength of Recommendation: Medium to High.

Objective: To generate as many conversions as possible within the budget provided by the advertiser. This bidding strategy automatically adjusts bids for each auction in real-time to increase the likelihood of getting more conversions.

Advantages: Help businesses to get more valuable conversions without manually adjusting bids daily. It is a good option for businesses with a history of successful conversions because it can help them maximize their return on ad spend.

Disadvantages: It may not work well for businesses which do not have a history of successful conversions. In such cases, it may be difficult for the algorithm to optimize bids without enough data. Additionally, businesses with a limited budget may not be feasible because it prioritizes conversions over budget constraints.

Bid Strategy: An automated bidding strategy designed to increase ad conversions. Advertisers set a daily budget, and the algorithm adjusts bids to maximize the number of conversions within that budget.

In bid settings:

1. Following the steps in chapter “Where to set and edit bidding for your Google shopping campaign in Google Ads”, choose “Smart shopping campaign” under the campaign subtype followed by “Bid settings”.
   1. Enter your daily budget.
   2. Select “Maximize conversion value” in the drop-down menu.
   3. [Recommended] Add a targeted ROAS. To calculate your ROAS and campaign profitability, go to the Google Shopping Campaign Profit Calculator.

Strategy 5: Manual CPC

Manual CPC (cost-per-click): A bidding strategy offered by Google Ads that allows advertisers to manually set their maximum CPC bids for their keywords or ad groups.

Recommended for: The Manual CPC bidding strategy is recommended for advertisers who want full control over their bids and are comfortable adjusting bids manually. It is particularly useful for advertisers who understand their conversion data and are looking to optimize their bids based on that data.

Strength of Recommendation: High.

The best bidding strategy setup:

1. Gain at least ~50-100/month conversions with Strategy 4: Maximize Conversions
2. Followed by Strategy 2: Target ROAS
3. And lastly, to go for Strategy 5: Manual CPC or Strategy 6: Manual CPC (Enhanced)

Objective: To give advertisers complete control over their bids, allowing them to set maximum and minimum bid limits for each keyword or ad group. With this bidding strategy, advertisers can optimize their bids to achieve their desired ad positions, maximize clicks, or achieve a target CPC.

Advantages: It gives advertisers complete control over their bids, allowing them to set maximum and minimum bid limits for each keyword or ad group. This can be particularly useful for advertisers who want to optimize their bids based on their conversion data or who have specific ad position targets. It is a good option for advertisers with a limited budget.

Disadvantages: It requires advertisers to set their bids manually, which can be time-consuming and require significant data analysis to optimize bids effectively. Not be the best option for advertisers who are inexperienced with bidding strategies.

Bid Strategy: Manually set their bids for each keyword or ad group. This requires advertisers to have a good understanding of their conversion data and to be comfortable with adjusting bids based on that data.

In bid settings:

1. Following the steps in chapter “Where to set and edit bidding for your Google shopping campaign in Google Ads”, choose “Standard shopping campaign” under the campaign subtype followed by “Bid settings”. Select “Manual CPC” under the drop-down menu. For Enhanced CPC, go to Strategy 6: Manual CPC (Enhanced)

Strategy 6: Manual CPC (Enhanced)

Enhanced cost-per-click (ECPC): This is designed to help boost your conversions for manual bidding by altering your manual bid if Google thinks it is more likely to result in a sale. This is more favored by retailers because it focuses more on the end sales results than driving traffic.

Manual CPC and Enhanced CPC are two different bidding strategies in Google Ads. With Manual CPC, advertisers manually set their maximum CPC bids for their keywords or ad groups, giving them more control over their budget and campaign performance. On the other hand, Enhanced CPC is an automated bidding strategy that adjusts bids in real-time based on the likelihood of a click leading to a conversion.

Recommended for: Advertisers who want some level of automation to optimize their bids based on historical conversion data while still maintaining some control over their bids.

Strength of Recommendation: High.

Objective: Optimize bids to increase the number of conversions.

Advantages: It uses historical conversion data to automatically adjust bids in real-time to increase the likelihood of conversions while maintaining a target CPA.

Disadvantages: It requires some manual adjustment of bids and may not be as efficient as fully automated bidding strategies. It relies on historical conversion data. This strategy does not consider external factors, such as changes in the market or competitor behavior.

Bid Strategy: An automated bidding strategy that adjusts bids in real time based on the likelihood of a click leading to a conversion. The bid is automatically adjusted to maximize the chances of conversions while maintaining the CPA. It allows for more efficient bidding as compared to manual bidding.

In bid settings:

1. Following the steps in chapter “Where to set and edit bidding for your Google shopping campaign in Google Ads”, choose “Standard shopping campaign” under the campaign subtype followed by “Bid settings”. Select “Manual CPC” under the drop-down menu. Tick the box to activate “Enhanced CPC”. We recommend selecting “Optimize conversion value” to maximize the total conversion value, considering the revenue generated by each conversion rather than just the number of conversions (Optimized conversion).