Value-based bidding is a bidding strategy in Google Ads that allows advertisers to set bids based on the estimated monetary value of conversions or other valuable actions on their website.
Why is this important? Because not every customer or potential customer has the same value to your business:
The goal is to maximize the return on investment (ROI) from the advertising spend by focusing bids on the keywords, ad groups, and campaigns that are likely to generate the most valuable conversions.
With value-based bidding, you can set an estimated conversion value for each type of conversion that you want to track, such as sales, sign-ups, or lead submissions.
The conversion value is used to calculate the expected value of each click, and Google Ads will adjust bids to maximize the number of conversions within the advertiser’s budget. This type of bidding strategy can be particularly useful for advertisers who want to drive business outcomes like sales or leads, rather than just maximizing clicks or impressions.
Whatever action you set as a conversion will be used by Google to optimise the traffic (for that set action).
Smart bidding will do a good job of automatically going after the audience that has the highest propensity to take that action. This is great, however it does not take into account the different value of Customer A versus Customer B.
To implement a value-based strategy you need data to allow the machine to have something to work towards or “chase”.
Typically you need to go through a journey as outlined below.
– You may have to start by driving clicks to get the machine to learn (drive traffic)
– Then once the machine has conversions – you may be able to switch to a Maximise Conversions strategy, you can then over time move to a target Cost Per Action
– When you have assigned a value to each conversion action you can switch to Maximise Conversion Value
– Eventually, you will have the option to move to a Return On Ad Spend strategy
To implement value-based bidding effectively, you need to set accurate conversion values, use conversion tracking, analyze performance data, experiment with different bidding strategies, monitor performance regularly.
For e-commerce campaigns, the conversion value can be set to the average order value (AOV) of a sale. The goal of the campaign is typically to maximize the number of sales within a given budget.
For lead generation campaigns, the conversion value can be set to the estimated value of each lead, based on factors such as the expected lifetime value of the lead or the cost of acquiring a new customer.
Values for lead generation campaigns may be more difficult to estimate than for e-commerce campaigns, as the value of a lead can be influenced by many factors, such as the quality of the lead and the expected conversion rate from lead to customer.
Inaccurate Conversion Tracking
Accurate conversion tracking is critical for value-based bidding. If conversion tracking is not set up correctly, bids may be based on incorrect or incomplete data, leading to poor campaign performance and inefficient use of budget.
If you need help planning and implementing a Value-Based ads strategy, our team of Performance Marketing Specialists can help guide you into implementing a winning strategy, that will squeeze more ROI from your digital media investment.
Author : Simon Lloyd