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Understanding Smart Campaign Settings: Goals, ACOS Limits, and Bid Modifiers
Understanding Smart Campaign Settings: Goals, ACOS Limits, and Bid Modifiers

Understanding Smart Campaign Settings and best practices for success

Updated over a week ago

What are Smart Campaign Goals?

Setting campaign goals for your Smart Campaigns informs the predictive AI bidding system about your advertising objectives. By defining a specific goal, Teikametrics automates the management of the Bid Modifier to ensure your ad performance aligns with your desired outcomes. This automation optimizes bid adjustments in real-time, enhancing the efficiency and effectiveness of your campaigns based on the goal you've set.

Smart Campaign Goals

Product Launch

Setting 'Product Launch' as your goal informs the bidder you are starting to advertise new products and would like to be aggressive with your bidding to accumulate Impressions, Clicks, and Ad sales while staying within your ACOS Limit.

Grow

Setting 'Grow' as your goal informs the bidder you would like to stay aggressive post launching your advertising to increase ad sales but you are looking to stay below your ACOS Limit for more efficiency.

Profit

The 'Profit' goal requires you to have COGS set so the bidder can analyze the profit margins of the products you are advertising. By knowing the profit margins of your products the bidder will analyze your performance and market performance to maximize the profit dollar return on your ads.

ROAS

Setting 'ROAS' as your goal informs the bidder you are looking to maximize the efficiency of your ads. The bidder will analyze your performance and market performance to bid toward the highest ROAS possible for your ads.

Liquidate

'Liquidate' is the most aggressive goal of the Smart Campaign Goals. This goal informs the bidder you would like to sell through your inventory as fast as possible without wasting ad spend. The bidder will increase bids to increase potential ad sales to liquidate your inventory.

Please note: The ACOS limit provided can exceed up to 50% to help achieve the liquidation goal, which is aimed to increase unit sales. Read More about ACOS Limit
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What is an ACOS Limit?

The ACOS Limit serves as "The Anchor" for your advertising strategy, guiding the Bidder to maintain profitability. It should be set equal to the average pre-ad gross margin of the products in the given ad group. This helps the bidder understand the breakeven point for the products within your ad group. To set the most accurate ACOS Limit, input the Cost of Goods Sold (COGS) for the SKUs involved. This ensures the Bidder can effectively manage ad spend, optimizing your ads for maximum efficiency/profitability.

How to Set Your ACOS Limit

Your ACOS Limit should be set at the pre-ad gross margin of the products within each ad group. This means:

  1. Identify Your Pre-ad Gross Margin: Entering your COGS allows Flywheel to calculate your pre-ad gross margin and this can be referenced to set ACOS Limit.

  2. Set Your ACOS Limit: Use this pre-ad gross margin value as your ACOS Limit. This limit indicates the breakeven point for the products in your ad group.

By setting the ACOS Limit at the pre-ad gross margin, you provide the bidder with a clear guideline on the breakeven point. This helps optimize your ad spend and maximize profitability.

Understanding Why Actual Measured ACOS Can Exceed Your ACOS Limit

When managing your advertising campaigns on platforms like Amazon and Walmart, you may sometimes notice that your actual Advertising Cost of Sales (ACOS) exceeds the target ACOS limit you've set. This can be concerning, but it's important to understand the factors that can cause this to happen, even when your campaigns are performing well overall. Here are three key reasons:

1. Volatility in Conversion Rates

  • What Happens: Conversion rates can fluctuate significantly over short periods due to various factors like changes in consumer behavior, competitor activity, or even seasonal variations.

  • Impact on ACOS: Ad spend divided by ad sales, any sudden drop in conversion rates (i.e., fewer sales) will increase your ACOS temporarily, even if your ad spend remains constant.

  • Example: If you're running a campaign and a sudden market trend causes fewer people to buy, your conversion rate drops. This means that for the same amount of ad spend, you're getting fewer sales, which leads to a higher ACOS for that period.

2. Window Length

  • What Happens: The time window you choose to measure ACOS can greatly affect the results. Shorter windows are more sensitive to day-to-day fluctuations, making ACOS appear more volatile.

  • Impact on ACOS: A shorter measurement window might show spikes in ACOS due to temporary factors like a sudden surge in clicks without a corresponding increase in conversions. Over a longer period, these fluctuations tend to smooth out, providing a more accurate representation of performance.

  • Example: If you measure your ACOS over just one day, and that day happens to have a lower-than-usual conversion rate, your ACOS might spike. Measuring over a month or two would likely give a more stable and realistic picture.

3. Bid Exploration

  • What Happens: To optimize your campaign, we often allow bids to explore the upper range of target bids. This exploration is necessary to find the optimal bid levels that maximize performance. However, during this phase, the actual conversion rate might be lower than expected.

  • Impact on ACOS: As these exploratory bids start high, they might lead to an increase in ACOS, especially if several keywords are being tested at once. Over time, as the system learns and adjusts by lowering the bids, the ACOS should stabilize and align more closely with your target.

  • Example: If you're launching a new set of keywords, the initial bid might be higher to test the waters. If these keywords don't convert as expected, your ACOS will temporarily rise. As the campaign continues, the system will adjust the bids, and the ACOS should decrease.

Summary

In summary, while it might be alarming to see your ACOS exceed the set limit, these fluctuations are often a normal part of campaign optimization. Volatility in conversion rates, short measurement windows, and necessary bid exploration all contribute to temporary increases in ACOS. Over time, as data accumulates and the system optimizes, your ACOS should align more closely with your targets.

If you have any concerns or need further assistance in understanding these concepts, feel free to reach out to our support team.


What is a Bid Modifier?

The Bid Modifier is a crucial tool in the bidding process that dictates the level of aggressiveness for placing bids. It functions in relation to the ACOS limit, indicating how close the bidder is willing to approach this limit to achieve performance objectives. For external campaigns, users need to manually adjust the Bid Modifier to control performance, ensuring it aligns with their strategic goals. In contrast, smart campaigns benefit from AI-driven adjustments to the Bid Modifier, which are automatically calibrated based on the campaign's specified goals. However, users retain the flexibility to temporarily override this automation if necessary, providing a balance between automated efficiency and manual control.

How does ACOS Limit and Bid Modifier work together?

The ACOS Limit represents the maximum Advertising Cost of Sales (ACOS) an ad group can achieve before surpassing the break-even point for the products within that group. By setting this value, the bidder knows the exact ACOS threshold to avoid exceeding, ensuring the ad campaign does not operate at a loss.

The Bid Modifier further refines this process by indicating how close you want your bids to be to the ACOS limit. A bid modifier of 100% tells the bidder to aim for an ACOS that is precisely at the break-even point. A bid modifier below 100% suggests a desire to perform under the limit, thereby making a profit on your ads. Conversely, a bid modifier above 100% indicates a willingness to bid more aggressively, even at the risk of incurring a loss, to boost the visibility and promotion of your ad.

Here are some examples for ACOS Limit and Bid Modifier working together:

ACOS Limit

Bid Modifier

Desired ACOS

50%

100%

50%

50%

50%

25%

50%

150%

75%

Bid Modifier for Smart Campaigns

One of the key advantages of using Smart Campaigns is the automated management of your bid modifiers. Predictive AI continuously adjusts your bid modifiers to ensure optimal performance, based on your set goals. This eliminates the need for manual adjustments and trial-and-error to determine the best settings, as the AI handles it all for you, providing an efficient and hassle-free advertising experience.

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