What is Target CPA Bidding Strategy?
Target cost per acquisition is a smart bidding strategy that optimizes on conversions at the set Target CPA. It is the cost you are willing to spend for each conversion. Or simply put in a business sense, how much is a conversion worth to you?
To illustrate Target CPA, let us consider an example. Blake has a car wash services company. He wants to collect as many leads as possible. Hence, he has written a short eBook named “Top 10 Hacks for a Clean Car”. He wants a lot of people to download his eBooks so that we could collect leads data such as name, email, and phone number. He would then use ebook downloads as a conversion. Based on his experience, each lead is worth at least $25 hence he sets Target CPA as $25.
This bidding strategy can be used as a standard strategy for individual campaigns or as a portfolio strategy which could be used across multiple campaigns. However, in order to do so, you will have to have your conversion tracking set up. Check out how to do that using this post. It is recommended to have at least 15 conversions in the last 30 days to use this bidding strategy effectively.
How does Target CPA work?
As Target CPA is a smart bidding strategy, harnesses the power of machine learning algorithms to make bid decisions. Based on the signals such as device, location, user interactions, competitive environment, day parts, and multiple factors, Google will make a decision to bid higher or lower on the instances that would lead to a conversion. This means that each bid will not be equal to your Target CPA. Some conversions may cost you higher and some lower, overall maintaining the average cost per conversion equal to Target CPA at the set campaign period.
In case, you are switching to Target CPA from maximizing conversions bidding strategy, it is ideal to wait for 30 days to compare the results. Usually, in the first week, you may see a slight increase in budget with a higher target CPA as the machine is still learning from the limited data. However, over time advertisers encountered a significant decrease in CPA as compared to their initial Target CPA. This means that if some advertisers try to play with the bidding process by setting the least possible CPA then they would not get many conversions.
Even though you set bids for a conversion, advertisers still pay for clicks. So it is a CPC buying model. You could also set a max or min bid for CPC for Target CPA. However, it is recommended to test out for at least 1 month to set min/max bid so that you are limiting the algorithm to learn and make bid decisions.
How to Set Up Target CPA as a Portfolio Strategy?
It is very easy to set up a portfolio bidding strategy. Click on the “tools” on the upper right-hand corner and click on the bid strategies under the shared library section. You will be redirected to the bid strategy interface that looks like this.
Click on the plus icon and choose “Target CPA” as the bidding strategy from multiple other strategies from the drop-down menu. Click on Select campaigns to choose the already created campaigns or you can leave it blank for now. Name the bid strategy appropriately. Set the appropriate target CPA and click on advanced options if you would like to set the bid limits for cost per click. It is recommended not to set this at the test period as it limits the data. And the bid limits cannot be used for display only campaigns. Click Save and you could use this strategy across all the leads campaigns.
When Should You Use Target CPA
With multiple smart bidding options with an objective towards driving conversions, it could get confusing when to use which bidding strategy. As a rule of thumb. use Target CPA to get a maximum number of conversions, when all the conversions have the same value. For example, Target CPA would be the bidding strategy if you have a few products and services with 4-5 different price points. As you might have guessed, Target CPA is not ideal for eCommerce campaigns where conversion value varies with thousands of products and variants.
In case you are just getting started with smart bidding, use maximize conversion bidding strategy initially to get max number of conversions at a given budget. Once you have at least 30 conversions, change the bidding strategy to Target CPA and test it. Monitor the campaign for 30 days and compare it with the last month to see if your cost/conversion is better as compared to maximize conversions bidding strategy. Over time, your cost/conversions will significantly decrease as compared to the initially set Target CPA. Test, compare and optimize to get the best out of the bidding strategy. For other nitty-gritty details, check out Google’s page on Target CPA