Most online shops have decided to use Google Product Listing Ads (PLA) in addition to old school AdWords text campaigns. But you have to be very careful with your bid optimisation – it is not quite the same as text ads. There are at least two major differences …
The click-through rate is independent of position
In traditional text ads, the higher the position, the better the click-through rate and the more traffic. In fact, the entire auction system of Google AdWords is based on this premise. It justifies that an ad in position 1 should cost several times more than one in position 8.
This is not the case with Product Listing Ads. Based on the product images and prices, buyers can instantly decide which offer is best for them. An investigation by Kohki Yamaguchi, a marketing analyst at Adobe, confirms that if we consider a single query, the click-through rate and the traffic are independent of the ad position. In plain English, this means that although the seller at position 1 pays much more than the one at position 8, the benefit is initially the same.
Product targets are always broad matches
The click-through rate and the traffic are actually independent of the position, but why do we get more traffic when the bid for a product target – the smallest unit of a PLA campaign, comparable with a keyword – is increased?
Depending on the amount of the bid, Google decides which queries best fit the product.
In other words, the more the advertisers bid for the product target, the more new queries pertaining to the product are added. This may be useful up to a certain point. Although a steady increase in the bid may initially result in increased traffic, the relevance of the additional queries will eventually decrease, meaning that the click-through and conversion rate suffer.
Sales may even completely stagnate. Thus, a campaign-wide bid increase of 40% may double the advertising costs but result in the same conversion rate. (This really occurred to me in a test!)
PLA bid management in practice
In theory, it is clear how the bid management for PLA should proceed: “Always set my product ad to the lowest position!” However, it is not as simple as that.
Almost identical search queries deliver four, five, or eight ad spaces for PLA. In addition, AdWords data analysis does not contain any information about the position. These can only be identified by a cumbersome and costly auxiliary tool.
The lowest-position strategy is therefore not feasible. Instead, proceed as follows.
Observe the conversion and click-through rates
If the conversion rate decreases and sales hardly increase after a bid increase, the bid is too high. A decrease in the click-through rate or a large difference between the bid and the average CPC can be indications that searches with low relevance are identified as suitable and that you should lower your bids.
Work with negative keywords
To counter the above-described broad-match behaviour of the PLA, you can work with negative keywords. Regularly review your search query reports for unwanted search queries and specify that your ad should not be displayed when these unwanted words or word groups are searched. You can thus bid higher without affecting the click and conversion rates.
You can even use negative keywords in order to submit different bids.
An example of this: The search queries “iPhone 5” and “used iPhone 5” lead to the same product. Although the seller is only offering new iPhones, he knows that many buyers looking for “used iPhone 5” will change their minds and buy from him.
The buyers want “used” so do not exclude but rather price 50% lower, for example. Customise a copy of your iPhone campaign. In the original, include negative keywords like “used” and “second hand”. In the copy, do not exclude these but rather lower all bids by 50% – done!
Set up a fine-grained differentiation
The basic requirement for good bid management is to manage the bids at the product level. Just ensure that products with different performance are not charged with an average bid, which would result in either a loss of revenue or unnecessarily high click prices. Especially important is the fine-grained differentiation for products that get many clicks and for which a good data base is available. Shopping campaigns, which, by the way, will replace the PLA completely by the end of August 2014, make it easier for you to identify the most important products.
Use extensions for PLA
If your goal is increase in sales at constant cost-to-sales ratio, there are other options you should use apart from bid management. If you are advertising to an American market, you can visually highlight your ad. As a Google Trusted Shop, your PLA will get a green check mark to distinguish itself from the competition. You can also check special offers via Google Merchant Promotions. Reduced items are then temporarily accompanied by the words “special offer”. In this way, you increase both the click-through rate and revenue without increasing the CPC. At present, it is still unclear when these enhancements will also be available in Germany.
A good advice
Those who have been trying to remain on top of Google AdWords at all costs are at risk of getting burned in the Product Listing Ads. Other mechanisms are at work here, which will require new, complex bidding strategies. The most important point here is the intelligent integration of negative keywords to counter Google’s willfulness when matching search requests and products.