The next is Bid Increment. This is a big concept that applies to the action we take when we reach the amount of clicks you specified. The amount you set for Bid Increment is added to your average cost per click to determine how to adjust your bids. By default, that is 0.11 but in my business I use 0.41.
Bid Increment is very significant and useful because using just the average cost per click to determine bid adjustments would progressively reduce the bid amounts. For instance, if you’re bidding $2 with average cost per click of $1 and we adjust the bid to $1, the resulting new average will be somewhere around 0.7.
If we keep updating your bid based on the average, the next average is going to be always below 0.7 or most probably around 0.5. Eventually, we’ll drive your bid to 0. We don’t want to do this because it’ll make you lose visibility, sales, and traction on your products.
Bid Increment therefore helps us know how much more than the average you want to add on your bid in order to maintain your average. If you think that $1 a good bid for this keyword and it is performing the way you want and reaching the ACoS level you want, in order to maintain that average cost per click, you will not need to bid $2 but most likely you would simply have to bid $1.40 or $1.50.
In my case,as a general rule, I add 41 cents on top of my average bid which allows me to keep my average bid and don’t lose against the competition.
This is the logic behind bid adjustment and how it functions and now, you should use it and figure it out yourself based on the data available on your account.