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Expected ROI

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# 1
Visitor ✭ ✭ ✭

Would the RoI improve if bids are increased. Tried looking up but could not understand.

1 Expert replyverified_user

Expected ROI

Top Contributor
# 2
Top Contributor

Hi @LetsThink W,

 

When you are raising your bid amounts, the ROI value may go either way. Whether it will increase or decrease depends on how elastically users react to your enhanced investment. 

 

Best,

Lakatos

Expected ROI

Participant ✭ ☆ ☆
# 3
Participant ✭ ☆ ☆

Hi @LetsThink W

 

Big question with lots of factors at play. 

 

In its simplest form, an increase in bids may result in a higher cost per click. If all other things are equal, factors such as conversion rate, product price, this would usually mean a decrease in ROI since you are paying more for a click. However, this brings into question how we define ROI. 

 

This also raises a question of ROI vs gross profit. If you raised your bids, you may experience more clicks (budget, position and ad assumptions) and this may drive more sales volume, again all things being equal. Although the ROI percentage % may be lower, the actual sales volume may be higher. If this sales volume makes economic sense, this could be a sensible option but i fully recommend a full calcluation to estimate this. This is extremely hard to do but you may consider some 'what if' analysis or a 'pivot' of some description to make scenario calculations. 

 

I would recommend using campaign experiments / drafts to experiment with higher bids, if and only if your calculation rationale is sound - i.e determine exactly how you calculate ROI and what makes sense to your client / business. 

 

I have seen many examples where I have provided a much higher cost of sale for a client than the original objective, based on the the factor of total sales is usually more preference so long as the cos is profitable. Most businesses would choose $200,000 sales per month at 20% cost of sales opposed to 1% cost of sale and $30,000 sales. Very generic numbers and simplifications but i hope that helps a little?

 

Good luck and good sales

 

James

Expected ROI

[ Edited ]
Top Contributor
# 4
Top Contributor

Hi @LetsThink W,

 

I do agree with @James Edw Goode, in that the query is really fundamental.

 

Just trying to add a scenario where ROI may go north. As you are increasing bids, the ads may start appearing on sites or for keywords where they were not competitive earlier. If these new websites or keywords convert exceptionally well, your revenue from sales may increase much more rapidly than your costs, which may result in a hike in your ROI.

 

Best,

Lakatos