Imagine a world where every ad click holds immense potential, where your campaign not only captures a high volume of conversions but also ensures each conversion holds substantial value for your business.
As marketers, we’ve seen accounts where 45% of Google Ad spend is wasted on clicks that don’t drive any profit to the business. That’s why we're constantly seeking innovative strategies to drive higher ROI and boost our bottom line.
One such approach that has gained considerable attention is value-based bidding for Google Ads, an evolution in bidding that places emphasis on quality over quantity.
In this blog, I will be discussing how you can gain the highest ROI with the help of value-based bidding. To learn more, keep reading ahead.
What is value-based bidding?
Value-based bidding is an advanced advertising strategy that optimizes Google Ads campaigns based on the expected value or return on Ad Spend (tROAS) of each conversion. It aims to prioritize conversions likely to generate higher revenue or profit for the advertiser rather than solely focusing on driving as much traffic or as many conversions as possible.
Clearly, not every campaign can use value-based bidding. For example, if every conversion has the same value for your business, target Cost Per Acquisition (CPA) or Maximize Conversion strategies would work as well.
In simple terms, value-based bidding works well when you can feed Google with your first-party data so that Google can learn what target audience is the most profitable. The data you are giving back to Google needs to have value you want to prioritize (i.e. sales revenue, customer lifetime value, etc.).
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Here are some common questions regarding switching to value-based bidding:
How can you minimize a decrease in conversions while switching to value-based bidding (tROAS)?
When transitioning to value-based bidding with a target return on ad spend (tROAS), it's crucial to implement strategies that help minimize the potential decrease in conversions.
While value-based bidding prioritizes higher-value conversions, there are several steps you can take to maintain a healthy conversion volume during the transition. Here are some effective strategies to consider:
1. Gradual Transition: Instead of immediately switching to value-based bidding for all campaigns, consider a gradual transition. Start by testing value-based bidding on a smaller subset of campaigns or ad groups and monitor the impact on conversion volume. This allows you to assess performance, make adjustments, and gradually expand value-based bidding to other campaigns while minimizing disruptions. Give the bidding strategy three weeks before adjusting the initial target return.
2. Optimize Bidding Thresholds: Value-based bidding relies on setting target ROAS goals. It's important to set realistic and achievable ROAS targets based on your historical data and business goals.
Setting excessively high ROAS targets may lead to bidding restrictions and decreased conversion volume. Optimize your bidding thresholds by striking a balance between desired ROAS and maintaining a reasonable conversion volume.
3. Adjust Conversion Value Assignments: Fine-tune your conversion value assignments to reflect the true value of different conversion actions. If you assign equal values to all conversions, it may not accurately represent their revenue potential.
Analyze historical data to understand the varying values of different conversion types and adjust your conversion value assignments accordingly. This ensures that value-based bidding prioritizes conversions with higher revenue potential while maintaining a diverse conversion volume.
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Why does the conversion amount drop after switching to ROAS?
ROAS targets act as a lever to influence your ad's participation in auctions. Setting a higher target ROAS reduces the number of auctions your ads are likely to enter. It allows you to prioritize higher-value conversions while potentially decreasing the overall volume of auctions your ads participate in.
Use a bid stimulator and set realistic ROAS based on your account data. Ensure that the bidding system has incorporated your preferred values and that your tROAS aligns with past performance, contributing to the maintenance of conversion quality.
Value-based bidding revolutionizes the way we optimize Google Ads campaigns by prioritizing higher-value conversions over sheer volume. Through assigning target return on ad spend (tROAS) goals and leveraging data-driven insights, advertisers can maximize the profitability of their advertising investments.
While value-based bidding may result in a decrease in conversion volume, implementing strategies such as gradual transition, optimizing bidding thresholds, adjusting conversion value assignments, utilizing automated bidding strategies, segmenting campaigns, and continuous monitoring can help minimize this decrease.
By striking the right balance between value and volume, advertisers can unlock the true potential of value-based bidding and drive meaningful results for their businesses.
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