As we manage our clients’ accounts, one of our main focuses is to manage ad spend efficiently while meeting or exceeding our clients’ return goals.

Last year, Google launched a geographic targeting feature, household income targeting, that allows us to more efficiently allocate spend for clients whose target markets fit specific income brackets, whether low, high, or somewhere in the middle. We’ve also seen this targeting work well for accounts whose average order value varies based on income levels.

Using household income (HHI) targeting, we can target 6 different income tiers and add bid modifiers based on how each tier performs, at the campaign level. Today, I’ll give you a brief overview of how.

As of October 24th, HHI targeting is compatible with Shopping campaigns! This new feature could be a great one to test in your account if you’re looking to make your shopping spend a little more efficient.

After adding the income tiers it takes about 24 hours for the data to populate, since geographic targeting has one day lag time rather than the typical 3 hour lag time.

One of our clients sells high end, designer furniture and we’ve seen huge success from lowering our bids on the lower two income tiers and increasing bids on the top tiers. This prevents us from paying as much for people who are looking for lower priced products and allows us to reallocate that spend to improve our position in the top income brackets where we see those higher conversion rates. HHI targeting works especially well for clients whose top terms are very general queries that bring in a lot of traffic, like “furniture,” or “wall art.”

How Does Google Create the Household Income Targeting Tiers?

Right about now you’re probably thinking, “Google, can you get any creepier?” Yes, it is surprising that they can target users this specifically, but Google is actually just using publicly available data from the Internal Revenue Service. Using the IRS’s income data, Google can group zip codes based on their average household income.

Because this data is from the IRS, household income targeting is currently only available for the United States. Below are the income tiers you can currently target within the United States:

One important note is that these tiers will probably only make up about 30 to 50% of your total traffic, so some of your traffic will still be flowing through the “United States” target.

Stacking Bid Modifiers

Typically bid modifiers are stacked against each other in the AdWords auction to determine the maximum CPC bid. For example, if you have a -15% mobile bid modifier, a +15% modifier for Tuesdays and a +25% modifier for New York in the auction, your maximum CPC will compound all these modifiers for the optimal bid. If you add an income tier into the mix, Google will use the most specific location bid modifier to compound against the mobile and ad scheduling modifiers. Using that same example, imagine you have all of the following modifiers:

• -15% mobile bid modifier
• +15% Tuesday modifier
• +25% modifier for New York
• +35% Top 10% Household Income modifier

Google will look at the location modifiers and use the most specific location, which would be the HHI modifier for the “Top 10%” income tier. Therefore, in the auction, your bid would use the mobile, Tuesday and Top 10% modifier and ignore the modifier for New York.

That being said, if you have very specific geotargeting at the state or zip code level that works really well for your account, be wary of implementing household income modifiers because it will overrule your less specific geotargeting modifiers.

Test It!

The only way to know if this type of targeting will work well for your account is to test it. The data will show you everything you need to know about performance within the income tiers.

Unfortunately, household income targeting is not compatible with AdWords Editor, so adding the different tiers to campaigns requires a little extra clicking and must be done to each campaign individually. Here’s how to implement HHI targeting in a campaign:

1. Navigate to the Setting tab under the locations menu and add a new location.

2. Click “Advanced Search” within the Locations Menu to find additional targeting options.

3. Choose “Location Groups” above the targeting search bar to the right of the map.

4. In the “Choose Location Group Type” menu, click “Locations by demographics.

5. After choosing the demographics option, select United States as the country to target.

6. Finally, add all of the available income tiers and press done to save the targeting.

I would recommend initially letting all of the household income tiers run to gather data. This way, you can better understand how these demographic brackets perform within your account. Once you’ve accumulated some data, you can then add bid modifiers based on performance.

For the client I mentioned earlier, we assumed that the top income brackets would be the highest converting across the account, and in the majority of our campaigns this is true. However, there were a handful of campaigns that had higher conversion rates in the lower income tiers.

One of our mottos at ROI Revolution is “If you can measure it, you can improve it.” Start measuring how your campaigns perform at different household income levels and tweak your bidding strategy accordingly. After all, the data never lies!