How using conversion-based bidding can affect CPCs

Green Line Digital POV on turning on conversion-based bidding & the effect on traffic.
Did you recently switch bidding strategies to got more leads, but see your CPCs rise?
This is an expected side effect of changing bid strategies, let’s look at why this happens & what should be done when this happens.
What is the “maximize conversions” bidding strategy?
“Maximize conversions” is a bid strategy in Google Ads that automatically sets bids to get as many leads as possible. This can be used on a single campaign or part of a portfolio bid strategy applied to multiple campaigns.
“Maximize conversions” bidding uses historical information from your campaign & contextual signals about the search to determine the optimal bid at the time of a search auction. Contextual signals can include user behaviors such as if a user has been searching for certain cars or visiting websites similar to your dealership.
Switching to this bidding strategy tells Google’s algorithm to look for people likely to convert rather than go for traffic volume to your website. In order for this bid strategy to work it requires conversion tracking to be set up & leads (like ASC form fills or calls from ads) tracked back to the account. We recommend enabling this test if you have over 50 conversions within 30 days, but it can work if your dealership has less. We wouldn't recommend enabling this if you have less than 10 however...
How Conversion-Based Bidding affects traffic.
When first changing a campaign from click-based bidding ( “maximize clicks”), we expect to see CPCs fluctuate. This is because when you are bidding for traffic, Google is optimizing for cheaper clicks, regardless of if they will convert.
Once the switch is made to conversion-based bidding, Google’s algorithm will work to find users close to making a call or submitting a lead form. These users are further along in their car purchase research and typically cost more to reach than users just starting to explore their options.
How to approach turning on Conversion-Based Bidding.
Once enabled, the new bidding strategy will send the campaign back into a learning phase for up to 7 days, although depending on spend, this can be shorter.
During this learning phase, key metrics to watch are lead volume, conversion rate and CPA and if those are improving. Our expectation is that you will see more leads with a cheaper or consistent CPA. This can take longer than the 7-day campaign learning phase, with 30 days being ideal to test a new bidding strategy. You could also conduct an a/b test to test the strategy prior to fully switching over your campaigns to see if this is right for your dealership.
The goal of switching to max conversions is to find your dealership higher quality traffic - and this will raise CPCs and ultimately lower overall traffic volume.
While we recognize this can be a little alarming in your analytics, our goal is always high quality traffic.
To help guide the algorithm, your search manager will review search terms as well as any audience signals being used in the campaign to set the campaign up for success.
Once sufficient data is being collected, a “target CPA” (how much you’re willing to pay per lead) can also be applied which allows you to tell Google how much you'd like to spend acquiring each lead to control overall costs.
The takeaway.
Conversion based bidding is a great tool to utilize for campaigns focused on driving leads and calls for your dealership. You’ll want to evaluate the success of this bidding strategy by reviewing your lead volume, conversion rate & CPA before and after switching the bid strategy. Moderate shifts in CPCs should be tolerated in order to reach higher quality users with your ads.
If CPCs rise too much, search term reporting, audience signals, and target CPAs can be used to help offset those costs.
Remember to give campaigns time to stabilize after the change before making a final decision on the success of a new bidding strategy.
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