Inside AdWords: Bidding Best Practices (Part 2): Improving Results with Location Bid Adjustments

Bidding Best Practices (Part 2): Improving Results with Location Bid Adjustments

Wednesday, May 22, 2013

Today’s post about improving results with location bid adjustments is the second in a bidding best practices series. The series began with prioritizing and iterating on your bid adjustments.

Your advertising performance almost always varies by location, no matter what kind of business you run. The good news is that if you optimize your bids for different locations, you can increase your sales and ROI.

Optimizing bids for better performance by location
With enhanced campaigns, it’s now much easier to boost bids in locations where your performance is stronger and reduce bids where performance is weaker. Before enhanced campaigns, you’d have to set up and manage an identical campaign for every location where you wanted unique bids. Since this was hard, the most common approach to location optimization has been to cut out underperforming locations using targeting exclusions. But in the long run, this approach can limit your growth and reduce your business competitiveness. So we recommend using bid adjustments rather than location exclusions.

Calculating location bid adjustments
Start by downloading a location performance report. Here’s how, using the AdWords interface:

Set the date range to the past 30 days (longer if your campaign is on the smaller side).
Click on the “Location details” button and select “What triggered your ad.”
Click the View button and select Region.
Click Download.

To maximize orders or leads at a particular CPA or ROI level, a common best practice for setting bid adjustments is to equalize your target metrics across all locations. As a math formula, it looks like this:

Location bid adjustment = 100% * ( ( Campaign goal ÷ Actual performance ) - 1 )

Here’s an example from a campaign with a cost-per-action goal.

Example of calculating your location bid adjustment

Location	Conversions	Cost	CPA	CPA Goal	Location bid adjustment
Florida	100	$800	$8	$10	100% * [(10÷8) - 1] = +25%
New York	120	$1080	$9	$10	100% * [(10÷9) - 1] = +11%
Ohio	70	$1050	$15	$10	100% * [(10÷15) - 1] = -33%
Pennsylvania	85	$850	$10	100% * [(10÷10) - 1] = 0%

You can implement your bid adjustments in the AdWords interface (directions).

Businesses with local stores or service areas
Closer customers are often more likely to buy from you and less costly to serve. So if your business has local stores or service areas, you should consider optimizing your bids based on customer proximity. For example, you can easily set one location target for customers within 2 miles of your business locations, and a second target for customers within 20 miles of your business locations (directions). Then use the approach described above to calculate your optimum bid adjustment for your two location extension targets.

Tips and reminders

Maintain a broad location target to cover your entire potential market. Targeting too narrowly can limit your reach, clicks and conversions.
It’s OK to set overlapping location targets with bid adjustments. We’ll only apply the most specific location bid adjustment. For example, say you have a +10% bid adjustment for Canada and a +20% bid adjustment for Montreal. When someone searches in Montreal, your bid will be increased by 20%. And you’ll see distinct performance stats for Montreal and all of Canada except Montreal on the Locations subtab on the campaign Settings main tab.
Be careful when you don’t have much data. Otherwise your calculated bid adjustments could end up being too high or too low, and you could end up with worse results instead of better. If you don’t have statistical expertise on hand, we recommend not adjusting bids in locations with fewer than 1000 clicks and 30 conversions, as a general rule of thumb. Lengthening the date range for your reports to the past 90 days or more can help.
Periodically check performance and increment your bid adjustments. From time to time, check your performance for each location target on the Locations subtab. Incrementally raise your bid adjustment where your performance is above your goal, and lower your bid adjustment where your performance is below your goal. This will allow you to optimize your bids over time and adjust to changing consumer behavior.