Most digital advertising sales are today determined by an auction, where all those who are interested in having their ads shown for a specific keyword or a specific audience place a bid, and then the highest bidder wins. This means that if you rely on digital advertising, bid management and optimisation is key to achieving the highest possible profit.
In the early years of digital marketing, being a successful digital marketer was synonymous with being good at bid management. On Google, Bids were set manually using Manual CPC, and you continuously tested and adjusted bids to try and find the sweet spot. In 2010 Google launched Enhanced CPC, which gave Google the ability to adjust your manually placed bids to a certain extent based on which customers it deems most likely to convert. This was the first step towards automated bidding strategies, and now automated bidding strategies such as Target CPA and Target ROAS are the norm. These strategies were originally mostly geared towards small businesses to make advertising effortless, but are more and more being used by agencies thanks to their superior performance compared to manual bidding.
The issue with Target CPA and Target ROAS is that neither of them take into account the business value that actually counts. Target CPA does not differentiate between a sale worth 5€ and a sale worth 500€, and Target ROAS does not differentiate between a sale with a 10% profit margin and a sale with a 70% profit margin. Advertisers are becoming increasingly wary of this issue, where they have difficulty with bidding towards the right customers and keeping track of which campaigns are actually generating profit for the business. Using Kuvio, advertisers are able to get the benefit from using automated bidding strategies, while at the same time targeting customers who generate the most bottom-line profit to the business. Additionally, they are able to track which campaigns are the most profitable, and adjust their advertising strategy accordingly. This leads to higher average gross profit while simultaneously lowering their advertising spend.
The next step from optimising bids towards profit, is optimising them towards customer lifetime value (CLV) and new customer acquisition. This way you can prioritise sales that are expected to lead not only to highest profit, but to highest lifetime profit. In practice, in this case you automatically prioritise new customers, as well as products that have a high number of repeat purchases. CLV bidding will be available on Kuvio starting Q1 2022.
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