Elasticity of costs is the bread and butter of econometrics. However, how can we apply elasticity to bidding?
The elasticity of costs is the bread and butter of econometrics. You usually hear it as “elasticity of demand,” the place you are attempting to grasp how far more demand there will probably be if we improve the worth by a certain quantity. Now in bidding ecosystems, marketeers attempt to perceive what number of “clicks” we’ll get if we improve our bids by X%. On this publish, I’ll present you a strategy to calculate the elasticity of bids in PPC advertising and marketing.
PS 1: The examples you’ll learn on this publish come from 1 of the 100s of campaigns I used to be managing at Skyscanner. I’ve eliminated all identifiers to guard sharing info, however it is possible for you to to see the way to calculate elasticity of bids utilizing actual distributed knowledge.
PS 2: All pictures are authored by me except in any other case specified.
Earlier than diving into calculating elasticity of bids, let’s return to econometrics 101 and perceive what’s elasticity of provide. Taken straight from this text: “Worth elasticity of provide signifies how rapidly producers shift manufacturing ranges in response to cost modifications.” [1] As…