What Is A Bid Penalty & When Would You Use It?

A Bid Penalty is a percentage-based adjustment applied to a buyer's bid price within a campaign. It reduces the buyer's effective bid during the highest-bidder sort order without changing the actual price the buyer returns. Bid Penalties help account for post-sale costs — like lead returns — that make a buyer's real-time bid less profitable than it appears.

Why Bid Prices Don't Tell the Full Story

When running a Ping Post Exchange or a Direct Post campaign set to Highest Bidder, Lead Prosper sorts buyers by bid price to sell each lead for the most profit. This is straightforward: the highest bidder wins the lead.

But the initial sale price isn't always the final sale price. Buyers can return leads after purchase, and those returned leads — now 30+ days old — can rarely be resold for anywhere near the original amount. A buyer who consistently bids the highest but returns a large percentage of leads may actually be less profitable over time than a lower-bidding buyer with few or no returns.

When to Use a Bid Penalty

Bid Penalties are most useful when you identify a buyer whose return behavior is eroding your margins despite strong real-time bids. A common scenario:

You have several buyers purchasing leads from a campaign. Buyer 1 consistently bids between $20 and $25, while the remaining buyers bid somewhere between $18 and $22 per lead. Because Buyer 1 is consistently bidding higher, they win the majority of leads.

Over time, you notice that Buyer 1 is returning roughly 15% of all leads purchased each month. Those returned leads are now too old to resell at comparable prices. Even though Buyer 1 pays more per lead in real time, the volume of returns means you may have made more money selling those leads to lower-bidding buyers who return far fewer leads.

This is where a Bid Penalty comes in. You can apply a 15% Bid Penalty to Buyer 1 to adjust their effective bid price downward, accounting for the average return rate. This changes the sort order so Buyer 1 no longer wins every lead by default, and more leads are routed to buyers who are more profitable after returns are factored in.

Example: How Bid Penalty Changes the Sort Order

A lead comes in and is sent to four buyers. Each buyer returns the following bid:

Without a Bid Penalty, the highest-bidder sort order is:

1. Buyer 1 — $25.00
2. Buyer 2 — $22.00
3. Buyer 4 — $21.00
4. Buyer 3 — $18.00

With a 15% Bid Penalty on Buyer 1, the sort order changes:

1. Buyer 2 — $22.00
2. Buyer 1 — $21.25 (bid price minus 15% penalty)
3. Buyer 4 — $21.00
4. Buyer 3 — $18.00

In this case, the lead is sold to Buyer 2 instead of Buyer 1. Even though Buyer 1 returned a higher bid in real time, selling to Buyer 2 is likely more profitable over time because Buyer 2 does not return nearly as many leads.

How to Set Up a Bid Penalty

Bid Penalty is configured at the buyer level within a campaign. To apply one:

1. Open the campaign and navigate to the buyer you want to adjust.
2. Locate the Bid Penalty field in the buyer's configuration.
3. Enter a percentage value (e.g., 15  for a 15% penalty).

The penalty is applied to the buyer's bid price after margins are applied. Lead Prosper uses the adjusted bid price when determining the highest-bidder sort order for that buyer.

A Note on Pricing Types

Bid Penalty can be applied to any buyer pricing type — Static Pricing, Conditional Pricing, or Real-Time Pricing. However, its practical value is greatest when pricing is dynamic (Conditional Pricing or Real-Time Pricing), because the bid price changes per lead and the penalty adjusts the sort order accordingly.

For buyers on Static Pricing, the Bid Penalty works the same way mechanically, but provides the same result as manually lowering the buyer's static price. For example, a buyer with a static price of $25.00 and a 15% Bid Penalty has an effective bid of $21.25 — identical to setting the static price to $21.25 directly. Either approach works; the Bid Penalty just provides a percentage-based way to make that adjustment.

The highest bid in real time does not always mean the most profit over time. Bid Penalty gives you a way to factor post-sale costs — like return rates — directly into the sort order so your campaigns route leads to the buyers that are actually the most profitable. Use historical data on your buyers to calculate an appropriate penalty percentage, apply it at the buyer level, and let Lead Prosper adjust the bidding order automatically. Over time, selling to lower-bidding buyers with fewer returns can consistently outperform selling to high-bidding buyers who return a significant portion of their leads.