ROI and Profit oriented Google Shopping Management

We often see that many advertisers use ROAS as a main metric to measure success of Shopping campaigns and manage bids according to this metric. But according to our experience, managing bids in that way can give non-obvious bad results.

For Example:

Let’s imagine a situation that we have a product (New Balance trainers) in our campaign with the following data:

At first glance, the result doesn’t look bad and Google gives us advice to increase bid to $1.7 because our performance looks good and many advertizes do that.

But if we add product margin to this data, we get other results:

So if advertiser continues to increase bids, it will cost more losses. The right way to set an effective bid is to use this formula:

Target CPC = item price * margin * conv. rate * invest. rate (% of investment which is set by advertiser from 1% to 100%), for New Balance shoes target cpc will be:

Target CPC = $45 * 35% * 6.3% * 75% = $0.74

So if advertiser sets up this bid, performance will be the following:

According to new data advertiser achieves positive ROI and Profit.

In many cases bids optimization in that way gives better outcomes than doing it according to ROAS and Google advice.

This approach requires detailed processing of each product and takes a lot of time, we call this process ppc micro-management. For these needs we developed Panda tool which helps to do it quicker and each our client has right bids.