Most people believe that lowering your bids will always lower your ACOS; however, that’s not always the case. While bids and ACOS are directly related, their relationship can be quite complicated at times.
Lowering your bids might not change your ACOS at all, or in some cases, it could even do the opposite, causing your ACOS to increase.
There are 4 reasons why this could be happening to you:
- Keyword visibility
- Ad rank
- Ad placement
- Search term visibility
If you’ve been in the PPC game long enough, you’ve probably had a keyword that’s not performing as well as you’d like. What do you do?
The gut instinct for most sellers is to cut their bids in half, hoping to reduce ACOS. Unfortunately, this might not change your ACOS at all.
At this point, you might think that there’s something going wrong with your bidding strategies or with your keywords. But the real problem is that your bids are at such a low status that you’re not getting any new impressions.
No new impressions means no new data. No new data means your keyword is in sort of a limbo state where it’s essentially paused. So the reason your ACOS is unchanged is because you haven’t collected any new clicks since lowering your bids.
What If You’ve Calculated Your Bids Correctly?
Let’s say you’ve calculated your bids correctly (you’ve set it based on Revenue/Click * TACOS), and your keywords still aren’t producing any new data. What do you do in that situation? Well you’ve got two options, neither of which is that great.
You can either choose to target a higher ACOS and raise your bids to a point where your keyword gets traffic again, or you can choose to get little traffic but within your target ACOS.
However, if you don’t think keyword visibility is your problem, then ad rank could be the culprit instead.
The second reason why lowering your bids might increase your ACOS is because of ad rank. Ad rank is determined by your Ad Quality Score and your bid price.
Your Ad Quality Score is determined by Amazon based on your relevancy, ratings, and sales velocity. Your bid price is how much you’re willing to pay to rank on a page.
When you’ve got a high Ad Quality Score and a high bid, you’ll likely win the top spot on most search result pages because of your high ad rank.
If you start lowering your bids on a keyword, well guess what? You’re lowering your ad rank too.
A lower ad rank means your ad will appear in a worse position on the page. These lower ranking spots typically have lower conversion rates which results in a higher ACOS.
As you can see, lowering your bids can cause a chain reaction that increases ACOS. It’s always good to be aware of how one change can ripple out into multiple different areas.
Ad placement is pretty similar to ad rank, but it’s more about where your ad is actually displayed. There are three main locations where your ad can be placed:
- Product pages
These three different locations typically have drastically different conversion rates, click-through-rates (CTRs), and cost-per-clicks (CPCs). As a matter of fact, we recommend adjusting your bids by placement to capitalize on these differences.
When you start raising or lowering your bids for a keyword, you might not only change your ad rank but also your ad placement too.
If you lower your bids, there’s a chance that your ad might begin showing up more on product pages. These pages could have less competition, lower CPCs, and lower conversion rates. Once again, this could cause your ACOS to spike up.
Search Term Diversity
The final reason why lowering bids can potentially increase ACOS is because of search term diversity.
Search term diversity occurs when you use auto campaigns or broad phrase match keywords to bid on a variety of search queries at once. Some of these searches are more competitive than others.
For example, let’s say you’re bidding on the broad match keyword “water bottle” with a CPC of $1 and an ACOS of 50%. Because it’s a broad match keyword, you’ll also be targeting a variety of search terms like “sports water bottle” or “insulated water bottle”.
“Insulated water bottle” has a 20% conversion rate with CPCs around $1. “Sports water bottle” only has a 5% conversion rate with CPCs around $0.50.
Then you decide to drop your bid to $0.90 because $1 is just a bit too much for you. This causes your ad rank to dramatically fall for “insulated water bottle” because your $0.90 bid is lower than the necessary $1 CPC.
Now all the traffic you’re getting from this keyword is coming from your lower converting search term “sports water bottle.”
Sure your CPCs are lower but so are your conversion rates, causing your ACOS to rise for this keyword. Luckily, the Badger has a solution for this issue.
How to Use Search Term Isolation
We’re going to be using the Research-Peel-Stick-Block Method (RPSB) to do this. Using this method, we can extract converting search terms and use exact match keywords to target them.
Every possible search query should be targeted with the right bid to match or else you’ll end up in the same predicament as our water bottle example.
This method lets you isolate “insulated water bottle” from “sports water bottle” and bid less on lower conversion search terms without losing your ad rank on higher conversion search terms.
So there you have it, the 4 reasons why lowering your bids won’t always lower your ACOS: keyword visibility, ad rank, ad placement, and search term diversity. Who knew bids and ACOS could have such a complicated romance?
As always if you learned something new today or have a question, leave a comment down below. Badger out.
Discover Us on our PPC Den Podcast
If you prefer learning via audio, we cover this same info in the podcast episode below. You can also find us on your favorite streaming platforms like Apple, Google, Spotify, and more!
- 0:25 Bids & ACoS have a complicated relationship
- 1:07 Keyword visibility
- 2:00 What if you’ve calculated your bid correctly?
- 2:48 Effects of ad rank
- 4:46 Considering ad placement on conversions
- 6:06 Search term diversity & CPCs
- 7:40 How to use search term isolation
- 8:42 Check out our Ad Badger PPC software