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The Full Question:
I tried to look for an answer to this, but couldn't find it.
When referring to the sensitivity with which we change our bids, do we care about the difference between new bid vs old bid OR new bid vs CPC for a given time period at which we are looking at?
pet dog - bid $1.25 - CPC $1.05 - ACOS 86%
The target ACOS is too high and I'd like to reduce my bid. Should I worry at all about making a big jump from the old bid to the new bid of $0.99, if it's only 0.06c less than CPC for a given period of time? (it may suddenly cut all impressions due to sudden drop).
Yes, it would effectively block the keyword from showing for a good while. You're best considering its overall contribution rather than viewing it in isolation.
If it gets 10 sales that month at 86% out of 100 sales overall then it's an important keyword and you might want to incrementally lower the bid - say no more than 12% every 2-3 weeks (against the current bid not CPC), and you could look at other areas of cost-saving so it matters less.
If it gets 10 sales out of 1000 sales that month you can afford to be more ruthless with it as it only contributes to 1% of monthly sales. You would need to factor in its normal monthly sales as it might have suddenly dropped, or gone out of trend for whatever reason.
You should also consider the following:
Is the keyword troubled by irrelevant non-converting search terms being channeled through it? Could you block those by negative phrase matching the irrelevant part (if it hadn't converted elsewhere in the campaign/ad group? Would this improve the keyword's performance going forward?
If the keyword has a long history of causing poor performance and you have already tried incremental bid management, then it will likely continue to be a problem. So, you would need to be more ruthless. It depends on its contribution to the whole advertising as to what you do.
If it is a primary keyword [for your product] then you should carefully track the organic rank and how it is affected by the bid changes. You might need to just live with it. Keywords have a market value. If it isn't a primary keyword then the risks involved with making too high a bid change are less troubling.
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