It seems like every other day Google is introducing a new feature into their Adwords accounts with the most recent feature being preferred cost bidding. This means that advertisers can choose to let Adwords control their Max CPC in order to keep their CPC constant. It sounds pretty confusing but think of it as a portfolio approach to managing your accounts.

When you enable preferred cost bidding, the Adwords system automatically updates your maximum bid several times per day to reach your preferred cost setting. This is basically a bid management feature for advertisers who prefer the certainty of knowing their actual CPC or CPM. Since the bid management feature works by changing your maximum bid in the background, all the ads can still be ranked like before, using the max CPC and Quality Score.

I don’t know anyone who has tried this probably because it is an approach that requires minimal management but requires the advertiser to have solid data on conversion ratios and cost data because without this data its hard to make an accurate decision about where you want to set you preferred cost.