What is Value-Based Bidding in Google Ads?

Value-based bidding differs from other Google Ads bidding strategies. It optimizes bids for conversions that will produce higher revenue for your business, helping you meet performance goals while increasing ROI.

Businesses with long marketing and sales journeys find it particularly essential to identify conversions clearly and assign monetary values to each one.

Defining Conversion Value

Step one in establishing the value of conversions is deciding what they mean to you, which can be more complex than it sounds due to various conversion types and how they’re reported; an iPhone purchase might be worth $2,000, while purchasing a phone case might only add $20 in sales.

Establishing the value of each conversion type is key to aligning your bidding with measurable outcomes that matter to your business. For instance, Google only adjusts bids to reach your cost goal when using a target Cost per Acquisition strategy – potentially overlooking opportunities with higher conversion values that might otherwise bring in. By contrast, using value-based bidding strategies such as Target Return on Ad Spend, Google works toward optimizing bids that achieve your return target without compromising conversion quality.

To assign conversion values, it is necessary to report each sale through its unique order ID or transaction ID – typically via the Google Ads pixel installed after checkout – then calculate their respective conversion values based on total purchase amount (including shipping and taxes) or average revenue per phone-call sale or any other conversion type specific metrics you are tracking.

Once you have collected this data, it can be fed into Google Ads Smart Bidding strategies and used by their algorithms to calculate each conversion’s “worth,” prioritizing them accordingly. You might prioritize leads who convert into sales with high lifetime customer value or purchases that easily convert to recurring revenues like subscriptions.

Value-based bidding can be effective for many non-retail businesses, including SaaS, insurance, healthcare, and education providers. However, it is crucial that companies carefully evaluate how updated best practices, such as value-based bidding, can fit with their specific company and vertical market.

Defining Conversion Rates

As a marketing manager, conversion rates must align with your overall business goals to maximize return on investment and achieve desired results. This is particularly relevant for companies with complex or lengthy sales cycles – but Google Ads now provides lead generation and subscription businesses a way to optimize their advertising budget based on anticipated value.

Maximize Conversion Value is a new bid strategy that allows marketers to set a target cost per acquisition (target ROAS) and optimize campaigns by this target while considering estimated conversion value as part of their optimization plan. This method is particularly helpful for lead generation and subscription marketers focusing on quality leads rather than quantity alone.

To successfully employ this bid strategy, it is critical that you can accurately track and report conversions and their values back to Google Ads – whether via extensions such as e-commerce transaction values, offline conversion imports, or third-party tracking software. To assign different conversion values at different steps of your funnel – be it purchases, form submissions, or lead start-ups – assign different conversion values via conversion types (like purchases, form submissions, or lead start-ups ), which allows you to prioritize certain keywords or placements for higher value conversions.

While its benefits are clear, implementing it may prove challenging. First and foremost, you must establish what constitutes a valuable conversion for your business – this could include purchase data, lead form submissions, or any other action that converts. Furthermore, consider whether offline conversions should be tracked using offline conversion imports, direct CRM integration with Salesforce or HubSpot, or uploaded formatted spreadsheets.

Next, it is necessary to determine how you will measure conversion value at each action within your funnel. These values must then be reported back to Google via tools like Zapier or direct CRM integrations with Salesforce or HubSpot – or through offline conversion imports if this option exists – then use Conversion Value Rules that optimize for desired conversion outcomes while respecting attribution crediting in CRM systems such as Salesforce or HubSpot.

Defining Conversion Types

To make value-based bidding work effectively, it is necessary to clearly outline which conversions are crucial to your business – such as purchases or actions that generate revenue like whitepaper downloads. Setting specific monetary values against each type of conversion allows machine learning algorithms to prioritize these ads over others.

Google Ads allows you to decide how often it evaluates the value of conversions when deciding how much to bid on them, with seven days being the typical period; you can set different intervals as necessary. Conversions must also take longer than this; should this occur, it will be necessary to exclude them from this evaluation strategy.

Report the conversion values to Google for incorporation into your bidding algorithms, using various means such as Google Tag Manager’s Offline Conversion Upload feature to pass information back from CRM systems or websites to Google Ads. Likewise, ensure your account structure allows for easy passing of this information onto the company.

Once your conversion types and values are in place, it’s time to experiment with bidding according to value. Value-based bidding usually outperforms traditional cost-focused strategies in terms of performance; however, success requires constant monitoring to ensure you meet your goals.

As with any change to value-based bidding, the switch will likely cause initial fluctuations. For instance, having many low-value conversions (such as whitepaper downloads) in your conversion history may hurt the results of value-based bidding experiments. Therefore, you must monitor results over multiple weeks before determining whether this transition is worthwhile.

Defining Conversion Attributes

To implement value-based bidding, you must identify what conversion attributes are most critical for your business – this could include purchase data, submitted lead forms, submitted, or other metrics you use to track conversions. You should also understand their monetary value so that once this information is in hand, you can optimize bidding on specific conversion actions or campaigns.

Use an effective bid strategy that optimizes conversion value to attract audiences likely to buy your most costly products or services. This differs from maximizing conversions, which attempts to optimize for as many conversions as possible within your campaign budget; when using this latter method, a higher conversion value might require spending over and above your allotted budget.

An effective bid strategy begins by looking at your company’s data. Assess what products and services you offer and the customer journey leading up to purchases (for instance, comparing laptop prices and features online can lead customers directly into buying one – although they might return later for additional research purposes).

Remember that transitioning from conversion-based bidding strategies (like tCPA and max conversions ) to value-based bidding takes time. Hence, the key is to give it enough time to make an impactful difference without making too many abrupt or sudden adjustments. Shifting bids towards new performance goals may affect current results and lead to short-term fluctuations in advertising ROI.

To maximize results over time, you must monitor which conversion attributes are most essential for your business and adjust bids accordingly. Furthermore, reviewing key metrics regularly is a good practice to ensure they align with your goals.

When creating a value-based bidding strategy, you can choose whether optimized conversions should be counted or recorded. This should count conversions by default, but you can change this setting to record instead. Furthermore, specify whether these conversions occur on an “every” or “one” basis; if they offer value each time they occur, select “every”; otherwise, select “one.”

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