Everything You Need to Know About Target CPA
What is Target CPA, and why are we talking about it?
Imagine you are an Ecommerce business selling kids’ tricycles.
Each tricycle costs you $60 to design, produce, ship, and pay salaries per unit. The sales price is 80$. If you want to break even, or even, ideally, make a profit, you should be aiming to only pay about $20 for acquiring a new customer. $20 would be your Target CPA.
When you set Target CPA as your automated bid strategy in Google Ads, Google’s algorithm will adjust your bids for you to help you get as many conversions as possible at or below the tCPA you set for a given campaign or across multiple campaigns (even though it doesn’t guarantee that your actual CPA will be exactly $20). Google is pushing Target CPA heavily lately…every time we ask for optimization recommendations, this usually comes up.
Here’s how the algorithm works; the Ads platform relies on historical data within your account and Google’s contextual data from your potential users to locate people who are ready to purchase what you’re offering at the moments they are searching for it. Then they make an optimal bid for your ad based on your Target CPA. Over time, the algorithm adjusts to learn more about your ads and your users, and seeks to keep your cost per conversion equal to your tCPA.
Empirical360 is a Google Premier Partner, meaning that we have expertise in managing Google Ads accounts and optimizing bid strategies. We are currently running several AB tests using this bid strategy. If you are not yet using Target CPA, and want to test it out or adopt it, here are some tips for implementing it in your campaigns!
Preparing your campaigns for Target CPA
Target CPA is an automated bid strategy, but you will still have to put in skill and effort in order for it to perform well. The bulk of the work that you’ll have to do happens before tCPA is even implemented.
Make sure your conversion goals are accurate and that you have enough data for the algorithm to work
Before Google can optimize, it needs to be able to rely on recent data to make adjustments. If you are just creating an account/campaign, you won’t have past data, but if you want to see optimal results faster, you should have at least 15 conversions in the past 30 days. More importantly, you need to make sure that everything you are counting as a conversion is actually a valuable action that contributes to your business goals.
To continue our tricycle manufacturer example, if an online sale is the conversion that matters most to you, set that as your conversion goal. You can track other conversions like phone calls and form submissions, but make sure those secondary conversions are not counted as conversions in the “Yes” column. (For more clarification on this, watch our tutorial on custom columns.) This step is probably the most important, because Target CPA heavily relies on what you count as a conversion.
Set your attribution model to a non-last-click model
Last-click attribution is not recommended by Google (or by us, for that matter), because it only takes into account the final step someone took before converting. For Google to accurately be able to predict bids and optimize towards a Target CPA, it needs information from multiple touch points in the customer journey. Consider using linear, or position-based (Google’s current “favorite”) if you want tCPA to work properly.
Ensure enough ads per ad group
Google recommends two standard search ads and one dynamic search ad per ad group. If you have less than this, your ads may not be served because Google takes variations into account and needs enough material to work with to achieve your Target CPA.
Allow for a learning phase
Because this bid strategy relies on machine learning, you need to give the machine time to learn! Just because you see a drop in performance or an increase in CPA initially doesn’t mean that tCPA was a bad idea or that you need to change bid strategies. The learning phase lasts from 15-30 days, according to Google, but we have seen it adjust in a few days. It depends on your specific campaigns, industry, and account settings, but in general, give yourself a buffer before you make any rash decisions.
Implementing Target CPA
Update the campaign directly
If you are ready to adopt Target CPA in your campaigns, you can change the bid strategy directly, using Google’s recommended tCPA or choosing one yourself. Either way, be realistic about your Target CPA; if you set it too low, Google will be limited in the auctions that it can enter into and learn from.
You can set bid limits in Target CPA, but only in search, and Google doesn’t recommend this because it is another restriction that hinders learning and optimization. You can set device bid adjustments, as well, which is typically recommended.
Deploy a draft experiment
At Empirical360, we’re all about data-driven decision making, so we never just implement something without testing it first. We suggest (particularly if you’re a large account ), creating a draft campaign, changing your bid strategy in that draft campaign, and then deploying that draft campaign using the experimentation feature in Google Ads. If you decide to do this, consider doubling your budget. Google takes into account your daily budget per campaign when optimizing towards Target CPA, so if you run a test campaign with a different budget than a real campaign, you may get different results.
Also, if you want to see the best possible results and know for certain the impact that Target CPA is having, make sure you are not doing anything else that could affect your Target CPA. If you’re changing landing pages at the same time, or offering a new service, this could have an impact on your CPA, and you won’t know if it’s Google’s algorithm or your own effort that is achieving results. That’s the benefit of a controlled test.
When your draft experiment is deployed, Google will see it as a new campaign, so be prepared for another learning phase (annoying but necessary).
Managing your Target CPA campaigns
Don’t set it and forget it
Many people set automated bid strategies because they don’t want to put in much time and effort into their campaigns and the word “automated” suggests that Google will do everything for them. Well, no – automated bid strategies can certainly make things easier for you, but if you want to grow and get better results, you will have to monitor and adjust your Target CPA based on Google’s recommendations and your own observations.
Have questions about Target CPA? Want to learn more about why Google is pushing it lately or how we’ve seen it perform in our accounts? We’d love to discuss it with you! Empirical360 specializes in PPC marketing. We’re Google Premier Partners, which means that we are among the top marketing agencies in the world when it comes to Google Ads management. We have the skills and experience necessary to grow your business and increase your revenue. Contact us today!
Shea Duncan - Author
Director of Content Marketing
Shea is an expert content writer and is a classic literary nerd! She loves writing highly engaging content and has a knack for making it convert!