Google Ads Tips: How To Calculate Your Max CPC
Hi, I think we are live I am just making sure that everything is working fine. I have got this new piece of software. So I just wanted to double check everything is okay. There are a couple of people online right now if you can see me and hear me okay, then please say yes in the chat box and then I can see. Yes, it is. Okay. Yeah, that’s good. Thank you Anish.
Okay. I want to keep a close eye on the questions being sent and I’ll try to answer them for you so we start off in a second. Okay. Thank you for joining in to this a YouTube live training. I had a lot of emails and requests for our subscribers on YouTube and our email subscribers to start some regular live training.
So I will endeavour to start these sessions, once a week, at least during different times of the day because I know we have got a lot of our audiences in the USA, Canada, India, Australia, so it’s fair for everybody, that they get the chance to join in live. Okay, let’s see.
Fine. So I’m going to share my screen and I had quite a few people email me about how much they should be bidding. How can you work out or calculate the maximum profitable bids you can bid for your keywords. There’s a lot of time if you bid too high then you may win the ad rank in the auction, but you will not get a higher return on investment or ROAS, which is a Return On Ad Spent.
So there is a very clever formula, designed or calculated by someone at Google to work out what is the maximum allowable bids, you can bid on Google Ads. So I’ll share my screen with you. You should be able to see my screen in a second.
There you go. Okay, so we concentrate on the box, which is with the yellow background. I’m going to zoom in a bit so you can see it a bit more properly, okay. So the way I have segmented this out is for all campaigns and then for all non branded campaigns.
Because if you are running a branded campaigns, then this may give you a completely a different or a very ‘rows-ey’ picture, compared to the non branded keywords because the branded keywords will always have a higher ROAS or ROI. Now in this instance, I’m working on ROAS, if you are running an e-commerce store then you ought to be running your campaigns on ROAS which is the Return On Ad Spent.
So what this number means is one is 100%. If you spend $1 on ads, you’re going to get one back. 1.5, you spend one, get back 1.5 one and a half. And if you spend one you get double or triple and you can make as many columns as you like. I will put the template of this Google Sheets in the description below so you can copy it and then you can tweak it, amend it to your requirements.
So basically there are three or four different metrics which you need to work with. If you are running a campaign at the moment, you may have an average conversion value. What is the value of each conversion? So when you sell something or multiple products, you will get the average value.
If it is for the lead generation campaign, then you can change that to ROI and a work-out how much you are getting back? So you can work on the average conversion value of your product. Then what is your desired ROAS? Now some companies they work on break-even and then have a customer lifetime value, which I am going to talk about in a minute.
And then they monetize it that way. So the of working at break-even or better is incredibly powerful and not many business owners or companies realize the potential of it because all they fear is that they are breaking even and not making any money whereas the money is in the back-end.
And I’ll show you in a minute as to why you should consider ROAS at a break-even or better. So then you enter the ROAS figure, so it is 200%,1.5 or 100% right? Then you will have a conversion rate in your Google Ads account. Enter that in whatever that conversion that may be, and if I were to change this conversion rate to six and that maximum CPC bid changes dramatically from here from 1.52 point $2.42 so what this is showing me and telling me is if I keep my bids at these levels, I can bid more.
But then my Return On Ad Spent will be a lot less compared to that one. Now the nature of this game is whoever is willing and able to pay the most for a conversion will win this game. So if I’m running my campaigns at 100% ROAS and my competitors are running at 200% I’m going to be dead every time.
Although I may not make money upfront, but if I’ve got my sales funnel set up and everything running in the background, I know that I’m going to make money in the long term. Just like the big companies, they will sell products as a loss leader to drive the foot fall in their stores because they know that if the people are coming to buy milk in the shop or store, they’re going to buy bread, butter and drinks and cigarettes or whatever. So that’s what we mean by the customer lifetime value.
So the other thing which I would highly recommend is not to work on just this average conversion value because this is a one off. And if you have a business where you only get a one off customer then obviously your acquisition costs are going to be very high because every time you need to get a new customer.
So you need to have some kind of a back-end sales funnel where you can then send out an email to your clients and get more sales because then you don’t have any acquisition costs. You have acquired the customer, you have already paid Google or Facebook, Instagram to acquire that client.
So this is how we work out our max CPC bid. So now I can be extremely aggressive over here on ROAS one compared to the last two. And then what I do is I also filter out my brand campaigns and just work on the non branded campaigns to see what’s happening.
So for example, if I take this out from 9.6, it goes down to 5.2 and so on. So now I can really bid a lot more pretty much double compared to the Max CPC over here. Now let’s change the metrics of it instead of just an average lifetime value of 50. Let’s say you get a client and then, by customer lifetime value what I mean is look at a transaction over a two year period, not until and what customer lifetime value is not that until the customer dies.
Look at over two year period of 24 months. If you are in insurance and you re-insure the car or the health insurance year-on-year, then that’s a repeat customer. So you will know that a majority of your customers, if you give them a good service, they’re going to renew. Or if you have a product where you can then up-sell down-sell, cross-sell other products or services, then you know that when we get a client we also end up selling other items to them. So let’s say we have a customer lifetime value of 200.
Now you see what happens is I can afford to bid a lot more compared to over here. Now, although you don’t want to be just bidding high for the sake of it, as long as you know the metrics, you will be able to make a profit every time. And you know that your bids are working extremely well. I’m just going to have a quick look.
Okay, I’m going to come on to the questions and comments in a minute. So please bear with, so now we’ve got a lifetime conversion value of 200. Our bids go higher and then the same will happen over here. Now my maximum CPC bids are extremely high.
I can be extremely aggressive and especially when you are in a very competitive market, the bidding is quite aggressive when everybody wants to outrank and outbid the competition. But then what ends up happening is you may get the ad rank, but you don’t know your numbers and you don’t end up making a profit. So this is why it’s extremely important that you know how to calculate your Max CPC bids. If you change this metric from 200 to 400, the whole picture changes again, because
we can now afford to bid even higher. And when you have got good quality score and high bids, you are going to win the auction every time. I’m not saying that you should bid for the number one position or the number one ad rank every time because it may not be the most converting acquisition.
Well, quite often I find a position between 1.8 and 2.5 is the sweet spot where I don’t pay over the odds for my clicks and also I get the highest conversion. So all you need to do is to copy this template, once I have finished this session, I’ll set up the link in the description box under the video and you can play around with the numbers, work out your customer lifetime value, what your desired ROAS is, and then you can change it. You can change it to three and see what happens, right?
But then you change that number to three so that you know that what you’ve done and just play around mess around change the conversion rates and if you don’t have any existing data right now, then all you can do is do work on projection or sales projections or any kind of calculated projection I should say where you don’t end up with a very high conversion rate and a very high lifetime conversion value.
So this is how you set up your Max CPC at the most profitable. So let me have a look at a couple of comments. ‘Can you please tell me about your free Google Ads course? Okay, that’s from Rukit. So Rukit here is the course.
So it has got over, I believe 15 hours worth of videos, over 120 videos. I keep adding more videos, to it for that you don’t pay to get access to it. You just enter your email and you will, you won’t get access to all the videos but a lot of the videos in there so that you can see and get a flavor of what this video is all about.
Also I have my YouTube channel which you are aware of and there are lots of other videos on there as well, which you can access for free. And I’ll put this link in the comments box below. Gushan is asking, ‘looking for automatic rules in next tutorial’. Okay, Gushan. I’ll absolutely cover that point in our next session. And I will be hosting these at least once a week. Omish, hi Omish,
‘I want to know how to run leads from YouTube ads, like whenever customer watches the ad and click on call to action, a form pop up like Facebook leads ad. I talked to tech support but they didn’t respond’. So from what I can understand from your comment Omish is you are looking to run video ads that drives traffic to a landing page with a form on it.
So this form is a perfect example or another one which I’ve got over here is the challenge which we have. So I run video ads with a call to action on the video. When somebody clicks on that call to action, they end up on this page, rather fill in the form, whether it’s a form on the page or as a popup, it really doesn’t matter. As long as you’ve got the conversion tracking setup, Google Ads will track your conversions, and that’s all you need to do.
So it’s fairly straight forward, very simple. And I’ll cover this in our next session. So I’m going to keep these sessions short and to the point because sometimes you can spend a lot of time over here and it just becomes far too long. So I’ll hopefully see you next week. It will be a different time.
So if you are one of our email subscribers or keep an eye out on our social media, you will be notified of the time and the date for the next session. So thank you very much for joining in. I hope you enjoyed it.
If you do have any comments or questions and you are watching this or as a recording after the event, then please do put them in and I’ll do my best to answer them for you. That’s it for now. Take care and bye for now.