One crucial aspect of running successful Google Ads campaigns for Ecommerce is selecting the right bid strategy. In this article, we will explore the differences between tCPA (Target Cost Per Acquisition) and tROAS (Target Return on Ad Spend) bid strategies and help you determine which aligns better with your business goals.
Understanding Target CPA Bid Strategy
The tCPA bid strategy focuses on achieving a specific cost per acquisition. It optimizes your campaign to generate conversions at a target cost you set.
In Performance Max campaigns, the tCPA bid strategy is called Maximize Conversions with a target.
By using historical data, machine learning algorithms, and various signals, Google Ads automatically adjusts your bids to maximize conversions while maintaining your desired CPA.
As a rule of thumb, it will allocate your budget towards cheaper SKUs, ensuring you get the most conversions for your investment.
When to Use the tCPA Bid Strategy
Target CPA is a great choice if your primary goal is new customer acquisition. It works great when you want to scale an account and profit margins are not your main consideration.
If your client is happy with the growth in new customers, but asks whether you could improve the ROAS as well, consider excluding some of the cheaper products from your shopping / PMax campaign.
The tCPA/ Max Conversions (with a target) strategy is available in search, PMax, display, Demand Gen, and campaigns (video conversions).
Understanding Target ROAS Bid Strategy
The tROAS bid strategy focuses on achieving a specific return on ad spend. It optimizes your campaign to generate conversions that yield a target ROAS.
In Performance Max campaigns, the tROAS bid strategy is called Maximize Conversion Value with a target.
By considering the value of each conversion, Google Ads automatically adjusts your bids to maximize revenue while maintaining your desired ROAS.
As a rule of thumb, tROAS will shift more budget towards more expansive SKUs in your shopping feed.
When to Use the tROAS Bid Strategy
Target ROAS is great when you put your focus on efficiency and protect your profit margins. In other words, you try to squeeze more revenue from each order.
As tROAS also considers the conversion value, it’s considered a more restrictive bid strategy than tCPA.
If your client’s objective is to scale the account, make sure to use a relatively low tROAS, i.e. at least 20% lower than the actual in the last 30 days.
The tROAS/ Max Conversion Value (with a target) strategy is available in search, shopping, PMax, display, Demand Gen, and campaigns (video conversions).
Considerations for Choosing the Right Bid Strategy
Even if your business has a clear main objective, there are still some other considerations for choosing the right bid strategy:
- Business Goals: Consider your business objectives and determine whether cost efficiency or revenue maximization is more important at a given time.
- How much data you have: Google recommends at least 15 monthly conversions for tCPA to work well, whereas tROAS requires at least 50 monthly conversions, per campaign. This means you can only use tROAS once you have enough data. If you’re a little impatient, you can use a portfolio bid strategy that would consider the conversions of several campaigns. Make sure your campaign grouping makes sense.
- SKU Segmentation: If you have SKUs with different price levels, consider separating them into separate campaigns. This allows you to apply different bid strategies to each campaign, optimizing for the specific goals of each SKU group.
Tips and Tricks
Here are some tips and tricks for working with tCPA and tROAS:
- Not all SKUs are created equal. Some conversions are more valuable than others. It’s best practice to split your search campaigns by product types, and your PMax / shopping campaigns by product type, price/margin groups, or performance. Each campaign can have a different target, based on your objectives and actual performance.
- Don’t force it. If your break-even CPA for a certain category is $50, but the campaign’s current CPA is $70, setting a tCPA $50 would probably push your bids too low and kill your traffic. Optimize each campaign gradually, until you reach an actual CPA slightly lower than your break-even value.
- Setting targets for growth. To allow the campaigns to grow and bid more freely, and given that you’re not limited by hard profitability targets, set targets that are ca. 15-20% below actual performance. To grow more aggressively, increase the difference between your actuals and your target.
- Some clicks will be way overpriced. If you see this often in your accounts, consider creating a portfolio tCPA bid strategy and assign a max CPC, up to 3 times higher than the average CPC in the last 30 days. This will ensure that the bidding algorithm doesn’t go too wild.
- Increase the conversion window to catch more data. Smart bid strategies rely on data for their performance, the more the merrier. Make sure your conversion windows are big enough to consider longer customer journeys. My go-to setting is 90 days post click, 30 days post engaged view (for all video ads), and 1 day post view (display). And of course, make sure the tag is implemented and fires properly.
- Focus on the relevant metrics. If your campaign uses tCPA strategy, your main KPI should be CPA, not ROAS.
Conclusion
Choosing the right bid strategy is crucial for running successful Google Ads campaigns. The tCPA bid strategy focuses on achieving a specific cost per acquisition, making it suitable for businesses whose main objective is new customer acquisition.
On the other hand, the tROAS bid strategy is more restrictive and is ideal for efficiency-focused campaigns.
By considering your business goals and understanding the characteristics of each bid strategy, you can make an informed decision that aligns with your objectives.
Remember to analyze your campaign’s historical data and consider SKU segmentation to maximize the effectiveness of your bid strategy.
Further Reading
- Mastering A/B Testing in Google Ads: Strategies for Optimal Results
- Google Performance Max vs. Standard Shopping Explained
- Google Ads Bidding Strategies: The Ultimate Guide
- Spying On Google Ads: PPC Competitor Analysis
- 5 Performance Max Best Practices To Nail Sales
