What is a Google Smart Shopping Campaign?
A Google Smart Shopping Campaign is an automated ad campaign that takes your product listings and dynamically creates ads that Google can serve across their search network and Google surfaces to put your products in front of the customers most likely to buy them.
It does this by using customers’ search terms in Google or recent online behaviours to target them. Every time a customer clicks on one of your ads, you will be charged a CPC amount (Cost Per Click) based on competition from other advertisers and the positioning of your ad. With a Google Shopping Smart Campaign, the amount you are willing to spend for a click (known as your “bid”) will be automatically determined and optimized so that you are getting the best value for money for your budget.
Higher bids attract more clicks, but are more expensive, whilst lower bids attract less clicks, but are cheaper.
You may find that if you set a relatively low budget, you will keep a low average CPC, but as you increase your budget, Google will have to increase the amount you are willing to spend on a click to reach additional customers, so your CPC will go up.
Setting Your Initial Budget
When starting your first Google Shopping Smart Campaign, you want to start with a lower budget and slowly increase it based on the performance of your campaign. However, you want to be careful not to set your budget too low. When your budget runs out, you will stop showing ads, and not every ad that gets clicked will result in a sale.
If a product sells at a higher price, it means sellers are willing to spend more for a click than if the product sells at a low price. For this reason, the average CPC (Cost Per Click) varies greatly between different product categories. Fors low-cost items, like basic arts and craft supplies, that usually cost less than $20 dollars, the average CPC may be lower than $1, even as low $0.20 or less. For an expensive item, such as a brand new refrigerator that costs over $1000, may have a CPC of well over $1, a could be as high as $2 for example.
The next major consideration is the conversion rate, which is the rate, as a percentage, of how often someone who clicks on an ad buys your product. If everyone who clicked on an ad for a $100 product purchased it, then a $1 click would provide good value to the advertiser. But if only 1% of people who clicked on the ad purchased it, they would be spending $100 in ads for every $100 product they sold, which would be losing them money.
As a rough guide, the average CPC for product ads on Google is $0.66, and the average conversion rate is 1.91%. That would mean you would need to receive on average 52 clicks, at a cost of $35 dollars for every sale made.
As a rough guide, average conversion rates vary for most product categories between 1% and 3%, and average CPCs vary between $0.30 and $1.00. This largely depends on the type of product you are selling and the sales price.
When you start your first Google Shopping Smart Campaign with Channel Cloud, you want to set a daily budget that is large enough to attract the number of clicks required to generate sales, whilst being small enough that it allows you to test the efficiency of your spend without a large investment.
We recommend you look at the average selling price of your products to help determine your initial budget. If you’re products sell for an average price of $1,000, and you have a daily budget of $10, you are unlikely to get enough clicks to accurately determine if the ad spend has been successful. You may receive 10 clicks with your budget and zero sales, which might look like a bad return, but with sufficient clicks, you might find that product has a conversion rate of 3%, so even though those first 10 clicks generated no sales, if you had generated 100 clicks, you would of gotten 3 sales. Conversely, if your $10 budget generates 10 clicks and one of those is lucky enough to be a sale, it may give a false impression that your conversion rate is 10%. So when you’re starting out with your first Google Smart Shopping campaign, try starting with a budget that’s at least as high as the average selling price of your products. Monitor over the first few days for performance. If your budget is only affording you a handful of clicks a day, try increasing the budget a little each day, to allow more traffic through, and reserving your judgement on the success of the campaign until you’ve received a sufficient volume of traffic (at least a couple of hundred clicks, especially if they are spread across a large number of products) to expect conversions.
Remember, Google Smart Shopping campaigns continually track and optimize performance as well, so the more traffic and sales are generated, the better the campaigns will be able to use this data to improve performance and target better traffic to generate more sales.
Set a Target ROAS
You have the option in Channel Cloud to set a target ROAS for your Smart Shopping Campaigns. This is your target ‘Return on Ad Spend’; The targeted value in sales revenue you hope to receive for every dollar spent in your campaign.
Whilst it might seem wise initially to set a high ROAS, it might not necessarily translate into the best overall performance for your campaign. When Google looks for placements to display your ads to potential customers, ad placements on the highest converting surfaces with the customers most likely to be interested in your products might be more competitive, as other sellers are also hoping to display ads there, and therefore more expensive.
Suppose you set your ROAS to $10. This means you are targeting a $20 return for every $1 spent on ads. That means to sell a $100 product, Google will be targeting a spend of $10 on ads. A $10 ROAS is very high performing, and there may not be a lot of placements available that will give you the sufficient volume of clicks and conversion rate needed to reach this. Google will target only the small number of placements that are cheap enough and high-converting enough to maintain this high ROAS, leaving a lot of available placements out that could still be profitable for you to show your ads. Conversely, if you set your ROAS to $1, then Google will target $100 ad spend to sell on $100 product, and you may find your ads in placements that are not suited to your product, and don’t convert well for their cost, and eat up your budget without performance, and after you factor in your own costs related to the product, you will find that you are making a loss on each sale.
When first launching your Google Smart Shopping campaigns, we recommend you don’t set a target ROAS at first, allowing the campaign to run for at least a few days so Google can “learn” more about what placements and what customers convert the best for your products. Then, once you start seeing sales come in, you can introduce a target ROAS to help give Google a benchmark to optimize toward, but don’t start too high. Remember, the higher the ROAS you set, the less sales you will likely get, but the more profitable they will be, and the lower you set your ROAS, the more sales you will likely get, but they will be less profitable. When you first set a target ROAS, start as low as you can while keeping profitable, and then slowly bring it up and monitor your results until you find a good balance.
For example, if your products sell on average for $100 and cost $50 to manufacture and ship, start with a ROAS of $2. This means for every $100 sale, Google will target around $50 of ad spend. This way you will be breaking even on ad spend, but maximizing the number of clicks and sales you get for your budget without losing any money. As your campaign matures, and Google learns more about your products, who to advertise them to and where, you can start to increase your ROAS. If you are selling 10 a day at a target ROAS of $2, you may find that increasing your target ROAS to $2.30 will increase your profit margin, but you only sell 9 a day. 9 profitable sales are better than 10 where you break even. But if you increase your ROAS to $5, you may quickly find your sales drop down to just 1 or 2 a day, so increase slowly until you find that balance. And remember, a sale is worth more than just the profit margin – a new customer can bring repeat business and help your brand to grow, so factor those kinds of additional benefits when setting your ROAS.
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