Value Based Bidding = Higher Conversion Value

. 2 min read

Though Value Based Bidding is not a new offer from Google (think of it as Smart Bidding 2.0), marketers are putting a greater emphasis on this feature to revolutionize and drive paid media marketing.

Not every customer brings the same value to your business. Through a Value Based Bidding strategy, your keyword and ad group bids are determined based on your advertising aspects such as conversion rate and net revenue.

Google uses this data to teach the system where to bid. It will decide which potential customers are most valuable to which advertisers. By bidding to the most valuable customers, you can increase profitability.

According to Google estimates, you can expect a 14% median uplift in conversion value at a similar return on ad spend when moving from target CPA to target ROAS.

The Hack:

When you use smart bidding, you focus your bidding on which goal you want to achieve. Take control of your ad spend and tailor your ad content to your target audience and business goals.

Value Based Bidding works across a variety of business models:

  • You can maximize for product that drive the most profit and set different values between TV and PC accessories, for example.
  • You can set the average value of a store visit conversion to let smart bidding maximize sales across all channels, online and in-store.
  • You can improve the quality of your leads by differentiating how much an online quote is worth from contract signed to drive growth through the lead-to-sale journey

The more you use smart bidding, the more data you will collect. Google Ads will get a better understanding of your customer values, building better targets for your ads.

Customer value will help you monitor the real impact of advertising on your business and make the right decisions to develop growth strategies, ultimately allowing you to capture the customer that matters the most (and generate the most value).

At first, it may be difficult to attach an exact value for each conversion action your business is tracking. The key to doing so is to know and understand their value relative to each other.

If you understand a rough estimate of their value relative to each other, you can make up a value to communicate to Google which conversion takes priority. For example:

  • Free trial signups (most important) – $100
  • Lead form submissions (hard conversion) – $75
  • Ebook downloads (soft conversion) – $25
  • Whitepaper downloads (soft conversion) – $25

Google will see these values and understand that free trials are 4x more valuable than whitepaper downloads. If you can estimate a value like this, adding that to your conversion actions in Google Ads will immediately improve the efficiency of your bidding.