Is Value-Based Bidding Your Ticket To Higher Quality Leads?

For lead gen marketers, we know it’s not just about generating leads; it’s about attracting the right leads – those that are most likely to convert into valuable customers.

Value-based bidding is a strategic approach that allows businesses to focus on optimizing campaigns for conversions that truly matter.

We’ve seen value-based bidding work for online sales and brick-and-mortar businesses as well, but here we’re going to focus on using it for driving higher quality leads.

This is the first of five articles I’ll be sharing weekly to delve in deeper and build on each episode of our new video series on value-based bidding for lead generation.

As you’ll see in this first video below, each is short enough to take in over a quick coffee break.

We’ll start from the beginning and cover what it is and whether value-based bidding could be the right strategy to elevate your lead generation efforts in Google Ads.

The Power Of Quality Leads

Not every customer brings the same value to your business. High-quality leads are more likely to engage with your brand, convert into paying customers, and contribute to long-term business growth.

Value-based bidding is particularly beneficial for businesses that typically need to nurture relationships with customers between an initial online conversion and a final sale.

By focusing on quality leads, you can streamline your sales funnel, improve conversion rates, and ultimately boost your bottom line.

So how can you do that with value-based bidding?

Bidding To Value

Value-based bidding allows you to prioritize specific value goals that align with your business goals.

These goals could encompass sales, revenue, profit margins, or even the lifetime value of a customer.

With this strategy, Google’s AI uses billions of combinations of signals along with your first party data to identify conversions that are most likely to deliver on your defined value objectives.

It then optimizes bids to focus your ad spend on reaching those higher value customers.

The Basic Mechanics Of Value-Based Bidding

Value-based bidding offers two primary pathways to optimize your campaigns by bringing values into Smart Bidding:

• Maximize conversion value: If you’re working with a fixed budget, this option focuses on extracting the maximum lead conversion value from your campaign within the constraints of your budget.
• Set a ROAS (Return on Ad Spend) target: This option enables you to optimize for conversion value at a specific target ROAS to help ensure your ad spend generates a desired level of return. When you set a ROAS target, the system will optimize to find as much value as possible on average at your target. There are data thresholds to using target ROAS which we will cover later in this series, but this is the preferred strategy when you want to achieve specific ROAS goals and be able to respond dynamically to shifts in demand. Target ROAS is available for single campaigns or a portfolio strategy applied to multiple campaigns.

Value-based bidding will maximize the conversion value based on budget constraints and ROAS targets where applicable, so higher value customers will be prioritized over volume alone.

Keep this in mind when comparing target CPA performance, which optimizes for conversion volume irrespective of value.

While the emphasis will be on attracting high-value customers, it’s important to note that you might still see some medium to low-value customers depending on the dynamics of the ad auction.

When using ROAS targets, the higher your target, the fewer auctions your ads are likely to enter. In other words, ROAS targets are your lever to make your ads more or less likely to enter the auction.

Is Value-Based Bidding The Right Fit For Your Business?

Value-based bidding has seen success across a spectrum of industries, but whether it’s the right fit for you depends on your specific business needs and capabilities.

Before embracing this strategy, you’ll need to address these key questions:

Can You Assign Meaningful Values To Your Conversion Actions?

You are likely already differentiating your customers’ value in some facet, formally or informally.

You’ll need to set a concrete value to each conversion, whether through static proxy values like lead scores or dynamic economic values such as total profit. (We’ll cover proxy values more in the third article in this series.)

Do You Need To Strike A Balance Between Volume And Value Goals?

Bidding to value means your campaigns likely will not generate the same volume of conversions as they would using Maximize conversions with an optional target CPA bid strategy. This strategy is designed to return a higher total value of conversions. Bid simulators can help you to understand this tradeoff.

If you want to maintain a certain level of traffic, use the Smart Bidding bid simulator to help you gauge the optimal ROAS target that will yield your desired volume of leads while maintaining a focus on quality.

Lowering your target ROAS will increase your reach, and raising your target ROAS will decrease reach while seeking out higher value conversions.

Are You Able To Measure And Connect Your Value Data To Google Ads?

Access to accurate and comprehensive value data is a must for implementing value-based bidding effectively. To start, this means having proper site tagging to track conversions.

Feeding the right first-party data values into Google Ads is key to training the system to identify and differentiate predicted customer value for each auction.

If your value objective is sales value, for example, you’ll need to be able to measure and connect that data back to your Google Ads account. We’ll cover how to do that later in this series.

Reaping The Rewards Of Value-Based Bidding

The initial setup of value-based bidding typically requires some effort up front, but don’t let that intimidate you.

You can start with a more basic set up and adopt more sophisticated approaches that have more technical requirements, such as optimizing for margin or lifetime values for example, later if you wish.

Value-based Smart Bidding gives the system the flexibility to set each bid based on the predicted value of the conversion and target higher value conversions. Over time, it learns which users are more likely to be higher value and more profitable, then bids accordingly.

Bidding to find the most valuable customers can deliver incremental revenue uplift and profitability. Businesses that have found success with this strategy report a marked improvement in lead quality.

On average, advertisers that switch their bid strategy from a target CPA to target ROAS can see 14% more conversion value at a similar return on ad spend.¹

Beyond The Basics

While we’ve covered the foundational aspects of value-based bidding, we’re just getting started.

In the upcoming articles in this series, we’ll dive deeper into this strategy, including how to identify and leverage the right data and values for your business, and how to share your value information with Google Ads.

By aligning your campaigns with the conversions that truly matter most to your business objectives, you can optimize your ad spend, maximize your return on investment, and achieve sustainable business growth.

Up next week, we’ll talk about figuring out the right data and values.

¹ SOURCE: Google Internal Data, Global, March 2021

More resources: 

• What Are Display Ads: A Complete Guide for Digital Marketers
• A Guide To Keyword Prioritization & The Newest Query Matching Controls In Google Ads
• PPC Trends 2024

Featured Image: BestForBest/Shutterstock