Digital marketing is a data-driven industry. In the pursuit of the best possible results and the greatest return on investment, every single action is recorded, analysed and used to gain insights.
Nowhere is the power of data more prevalent than in Google Ads. Between keywords, bid strategies, ad groups and budgets, there are a wealth of contributing factors to consider, and knobs and levers to twist and pull.
Today we’ll be taking a look at one of the most important yet misunderstood factors: conversion value.
What is it, why is it important, and how do you use it to your advantage? Read on to find out.
What is a digital marketing conversion?
A digital marketing ‘conversion’ is any action taken by a potential customer that results in them completing a desired goal. Conversions indicate that potential customers are moving further down the sales funnel.
The term ‘conversion’ is somewhat loose one that can mean different things to different marketing professionals, and that can apply to any and every action a user might take on their journey with your business. But to get a sense of what a conversion looks like, examples include:
- When a user makes a purchase on your website.
- When a user revisits an abandoned shopping cart.
- When a user clicks ‘BOOK A MEETING’ on a landing page.
- When a user downloads your app, or takes any action within it.
- When a user messages a chatbot.
- When a user clicks through a Google Ad.
If we focus our attention specifically on Google Ads, we get the following conversion definition from Google:
“An action that’s counted when someone interacts with your ad or free product listing (for example, clicks a text ad or views a video ad) and then takes an action that you’ve defined as valuable to your business, such as an online purchase or a call to your business from a mobile phone.”
And it’s the definition of valuable mentioned here that the conversion value metric seeks to clarify for a business that uses Google Ads.
What is conversion value in Google Ads?
Conversion value is a numerical value that you, the advertiser, assigns to specific conversions that occur through Google Ads. This value represents the impact that the conversion will have on your business.
The fact of the matter is that not all conversions are created equal. Consider two potential customers:
- Customer one clicks through your Google Ad, only to bounce out of your website after a few seconds.
- Customer two clicks through a Google Ad to a landing page, clicks the ‘BUY NOW’ button and completes a purchase.
The conversion value of customer two is exponentially larger than the conversion value of customer one. In helping you to quantify the value of each conversion, the conversion value metric helps your business understand where it should focus its energies and invest its advertising resources.
Why is conversion value important?
By assigning conversion values to all the Google Ads actions that a customer might take, an advertiser is able to measure, track and optimise their return on ad spend (ROAS).
Setting conversion values up grants an advertiser far greater control over their Google Ads strategy, particularly in terms of creating the most effective possible bid strategy that delivers maximum return for minimum spend: the target ROAS smart bidding strategy.
By assigning conversion values to all identified Google Ads actions, you gain a far deeper level of insight over your Google Ads performance than you otherwise would. Conversion values offer a lens through which you can view the true value of every element of and action within a campaign, in order to identify the areas of investment that have the greatest prospect of delivering a return. You can also see where you’re underperforming, and either pull your investment from those areas or take a different (and hopefully more profitable) approach.
Without the clarity offered by conversion values, you’re not exactly flying blind, but your vision is comparatively impaired. Your only tools are more generalised, homogenous numbers relating to conversion costs and volumes.
How to set up conversion values and conversion tracking
The process of setting up conversion values is a relatively simple one for anyone familiar with Google Ads. It can either be done as part of the process of setting up a conversion action, or it can be applied to a conversion action that already exists.
To apply a conversion value while you set up an action, navigate to the tab labelled ‘Value’ in the Google Ads conversion screen. There you’ll be asked to choose between ‘static’ and ‘dynamic’ value. Static applies the same value to every action of this type, while dynamic changes the value of the action on a case-by-case basis according to a number of pre-defined factors. Dynamic is more complicated, but also tends to be far more valuable in most situations, at least when it’s used the right way.
- To choose static value, click ‘Use the same value for each conversion’.
- To choose dynamic value, click ‘Use different values for each conversion’, then follow Google’s instructions to set it up.
To apply a conversion value to a pre-existing action, navigate to Tools & Settings > Conversions. Find the relevant conversion, then click ‘Edit Settings’. This will take you to the same screen as mentioned above, where you can choose to apply either a static or dynamic value.
Conversion values and Google Ads bid strategies
Once you have set up values across a number of conversions – and ideally all of them – your challenge becomes optimising each of them in order to maximise your Google Ads ROI.
This optimisation begins with your bid strategy. Now that Google Ads knows what you believe each conversion to be worth, it can largely automate the bid process, spending whatever amount is necessary to drive a return. This brings us back to that magical acronym ROAS – return on ad spend.
The Target ROAS bid strategy is built on a foundation of conversion values. This fully automated option uses Google Ads smart bidding technology to analyse and predict the value of a potential conversion whenever a Google user is searching for something you offer. It then automatically adjusts your bids in line with these insights to maximise your return. While a somewhat tricky system to set up, one it is it more or less takes care of itself.
Target ROAS will only be available if you’ve set conversion values within a campaign. If you’ve done that, it’s simple to turn on: just navigate to your Google Ads campaign screen, tick the campaign/s you want to change, click Edit > Change Bid Strategy, then select ‘Target ROAS’.
Should I apply conversion values in Google Ads?
The short answer as to whether you should apply conversion values: yes. This is an incredibly useful feature that gives your Google Ads efforts the direction and impetus they need. The more pertinent question is perhaps whether to apply static or dynamic values.
Static values are fine for when the value is self-evident and unchanging, like an ad that pertains to a specific product or service. Dynamic values, meanwhile, are far superior when a number is less obvious, e.g. the value of a single generated lead or the download of a free ebook.
It isn’t easy to come up with the answers to these sorts of questions – you’ll need to take a deep dive into Google Analytics, and look at metrics like conversion rates and PPC values. But if you can begin with a decent approximation you can then refine your estimates as you begin your target ROAS bidding journey.
The other option: get help from a team of experts.
The inherent complexity of Google Ads is why so many organisations work with professionals. As with any specialist tool, the power of conversion values in Google Ads is only really unlocked when it’s placed in the right hands.
At Traction Marketing we have spent years helping Kiwi businesses capitalise on Google Ads. We help you get the greatest possible return from your advertising investment, using high-end tools and techniques, like dynamic values and Target ROAS bidding, to earn you more.
If you’re ready to elevate your Google Ads game, we’re ready to help. Get in touch with our friendly team today.