The 3 Types of Bid Management Systems & How They Work

bid management systems

Manual bid management might work for small businesses and highly-niche industries, but most companies stand to benefit from bid management systems running their PPC campaigns. These management options vary from simple widgets that change your bids to complex software tools that use AI and machine learning to adjust bids based on audience behavior.

In the same way that bid management systems vary in complexity, they also vary in price and required resources. While you may want cutting-edge bidding options, you may only need a mid-range tool.

Understanding the different bid types and the tools that are out there can help you make the best decisions possible for your PPC management plan to increase your revenue and grow your business. Here are three bid management strategies for your campaigns.

Rules-Based Bid Management

The most basic bid management systems follow rules-based algorithms that adjust individual keywords based on a set of parameters. As you develop your campaign, you will likely start off with one rule and then expand to others to improve the quality of your campaign.  

To follow a rules-based bidding system, you start by selecting a conversion metric you want to track. These include:

  • Cost-per-acquisition: the amount you spend to land a sale.
  • Cost-per-click: the amount you spend for a click on your ad.
  • Cost-per-impression: the amount you spend for someone to see your ad.

From there, your campaign tool sets bids to achieve these goals. For example, if you have a 10% conversion rate then you would need 10 clicks to make a sale. If your CPA is $50 then you could spend a maximum of $5 per click to stay within your profitable window.

In bid systems like Google Adwords, you can set rules for CPA targets as well as maximum CPC bids and CPI goals. These are just two rules you can set for manual bid management systems. However, there are dozens of other rules and limits you can apply. A few of these include:

All of these limits world together to optimize your campaign. By creating guidelines for the geo, time, date, and device, you cut down on wasted clicks from people who were never going to buy from you. As you optimize your PPC account, your average CPA decreases and your ROI goes up.

Most brands start with rules-based bidding when they first develop PPC campaigns and then expand to more complex bid management systems.

geo bid management

Positional Bidding

While rules-based bidding is convenient for brands that are on strict budgets who want to follow set KPIs to reach their goals, there are other options that work better for others. Bid management systems also cover positional bidding, or setting your bids to an optimal position for maximum conversions.

If you look at your Adwords reports, you will notice that the higher the position, the more clicks the ad receives. Marketers from the SEO world will remember that the top three positions in Google get the majority of clicks, and the same concept applies here. This is one of the main reasons why Google changed the SERPs to show four ads at the top instead of three in 2016.

While the top ads get the most clicks, bidding to first position isn’t always the best move. This is where your CPA and CPC goals come in. It could cost $10 to push your ad to first position, but your ads may need to stay at $8 CPC levels to be profitable. Moving your bids down to second position will cause a small dip in traffic, but you could save money and achieve your efficiency goals because of it.

Improve Your CPCs with Good Quality Scores

Positional bidding uses “profit per-thousand-impressions” instead of “cost-per-thousand” bidding, which means some brands might actually pay less to reach first position than others. Google’s goal is to make money, and if people aren’t clicking on your ads, then they won’t profit from showing them. Campaign managers who create low-performing ads may find their CPCs increasing for certain positions, while those with high-performing ads could find their CPCs decreasing and their positions increasing.

If you wonder about the quality of your ads, look at the Quality Score assigned to keywords. High quality scores result in better placements. While most experts discourage ad managers from bidding based on quality scores, they can be used to improve the overall health of your ad copy and landing pages.

google adwords example

Portfolio-Based Bidding

Portfolio-based bidding is the most complex management option, as it looks at what is best for your campaign as a whole, rather than bidding on specific keywords or even ad groups. The other bidding rules treat each keyword or ad group as individuals; however, bid strategies that focus on the whole portfolio review your keyword lists to determine which ones have the highest chances of success.

Historical weighting is a significant part of portfolio-based bidding. The system will look at a keyword’s past performance and determine where it falls on the team and where it will have the greatest odds of success.

Performance-based bids focus on metrics like target ROAS, or return on ad spend. For example if you have a target ROAS of $100, then your traffic will likely be limited to customers who are likely to buy and ads that provide high conversion values. However, if your target ROAS drops to $50, then the ad distribution will be more varied and the system will bid on riskier keywords.

Portfolio-based bidding is ideal for brands that want to expand their overall reach, and ad managers who are willing to decrease their average ROAS to increase brand awareness and move customers deeper into the sales funnel.

Turn to the Professionals for Your Bid Management

Manual bidding is a great way to learn PPC and understand the ins-and-outs of your campaigns. However, as your paid search efforts grow more complex, you need to make sure you’re driving the best traffic (and the most traffic) possible to generate sales or leads. That’s where we come in.

Trinity Insight specialized in digital marketing and is both a Google Premier Partner and a Bing Ads Trusted Professional. When you work with us, you will have a dedicated team to focus on your bid management and optimize your campaigns to create the best strategy possible.

Contact us today online or call one of our experts by phone to set up a free consultation. We can talk about your needs and create a plan for PPC success.  

Trinity.One Collapse

Hundreds of Insights. One Source of Truth.

Ecommerce Analytics and Business Intelligence Software