Maximize Conversion Value

WHAT IS GOOGLE’S MAXIMIZE CONVERSION VALUE?

Google’s Target ROAS and Maximum Conversion Value both aim to achieve highest efficiency and return within your campaigns. However, Maximum Conversion Value differs in that you can specifically maximize KPIs such as sales, revenue or profit margins while Target ROAS is solely focused on achieving a return on ad spend goal. For this bid strategy, every conversion must be assigned a conversion value. Advertisers do have the ability to run Maximize Conversion Value with or without a Target ROAS focus. Utilizing this option provides an additional layer of ROAS bidding to reach your lower funnel strategy goals. When Maximize Conversion Value with a ROAS goal is selected campaign performance will be similar to Google’s Target ROAS strategy.

BVA’s team leveraged different types of Smart Bidding campaigns while in Beta for many of our clients and exceeded goals and saw stronger monthly ROAS and transaction scale than in previous months. A handful of BVA clients had record breaking months as a result of Smart Bidding campaigns.

To put the magnitude of this new feature into perspective, the results speak for themselves. We tested Smart Shopping campaigns for numerous clients and have seen as high as a 130% increase in ROAS at a 105% higher spend. We have also tested Maximize Conversion Bid Strategy in Adwords with BVA clients and saw a 26% higher ROAS.

WHEN TO USE MAXIMIZE CONVERSION VALUE

USING MAXIMIZE CONVERSION VALUE WITH NO TARGET ROAS

Max Conversion Value with No Target ROAS can be utilized if you: cannot assign a value to every conversion action for your campaign and/or you have no specific ROAS goal. This bid strategy is ideal for advertisers who want to optimize towards lower level KPIs such as revenue and ROAS, but don’t have a specific ROAS in mind. Using the algorithm, Google Ads will optimize and bid to efficiency given your keywords, ads, geo targets and audience selections.

LIMITED BUDGET CAMPAIGNS

If your campaign is limited by budget and you are already happy with the performance (assuming you don’t have more budget) try using the Maximize Conversion Value bidding strategy without setting a ROAS goal. This way, max conversion value means max ROAS.

For example, let’s say your limited daily budget is $200 and your revenue goal is $300. In this case, it’s ideal to increase your budget if you are happy with the ROAS. But, chances are, you don’t have a bigger budget. The next best thing to try would be to increase the Target ROAS until the campaign stops losing impressions. 

Well, the good news is, Maximize Conversion Value will now automatically do this for you! It will go after a higher revenue goal in this case, which means higher ROAS (remember the daily budget is limited in this scenario).

That being said, ROAS and revenue are not the most advanced eCommerce goals. Why? Because higher ROAS don’t necessarily mean higher profit.

Benefits

Conversion values help you track and optimize your campaigns’ return on investment (ROI).

You can use the Target (ROAS) bid strategy to help maximise your conversion value while averaging your target return on ad spend.

If you don’t have a specific return on ad spend target, you can use the Maximise conversion value bid strategy to maximise the total conversion value of your campaign within your specified daily budget.

Here are some other benefits of using conversion values:

• Better insight: You can measure the total conversion value generated by your campaigns’ conversions. This also helps you track your campaigns’ ROI by using the ‘Conversion value/cost’ column. You can use this data to identify keywords, ad groups and campaigns that show a high or low return on investment and manually change bids, budgets and targeting.
• Smarter bidding: Once you set up your conversion values, you can use either the target ROAS or Maximise conversion value bid strategy. Automated bid strategies automatically set bids to optimize for your performance goals across specific campaigns, ad groups and keywords.
• With target ROAS, bids are set to maximise conversion value, such as sales revenue or profit margins, while trying to achieve your target return on ad spend (ROAS).
• With Maximise conversion value, bids for each auction are optimised to maximise conversion value.

Cautions for Maximize conversions

Don’t run this campaign without conversion tracking

The platform will maximize the number of conversions being tracked, but, if you don’t have tracking conversions, the algorithm is more likely to make decisions to find a customer that is likely to convert.

Keep an Eye on CPC

Be careful, Google’s algorithm will help you, but it will bid whatever it needs to get the most conversions possible. So, after using this strategy, you can notice an increase in your CPC.

But, although Maximize Conversions can increase some expenses, the increased conversion rate can balance you back out. Your CPC will be higher, but conversions will be growing, resulting in a lower CPA and a higher return on investment. Besides, the new option to add a target CPA can help you keep this in control.

How to estimate conversion value

When estimating value-per-conversion, it’s often strategic to factor in things like repeat business, word-of-mouth, and lifetime customer value. Factoring in these values can give you the flexibility to bid higher while confidently bidding below your value-per-click. Let’s look at a fictional business-to-business machinery company named Example Machines to see how this works. Rather than sell directly online, Example Machines uses AdWords to generate leads for its sales team. We’ll factor that in too.

Short-term conversion value for Example Machines

• Average deal revenue: $3,000
• Profit margin: 45%
• Leads that convert to a deal: 20%
• Value-per-conversion (short-term): $270 ($3,000 * 45% * 20%)

Factoring in word-of-mouth

Example Machines has data showing that for each customer they usually gain 15% in additional business through word-of-mouth. Here’s how we factor that in:

• Value-per-lead (short term): $270
• Gain from word-of-mouth: 15%
• Value-per-conversion (+word-of-mouth): $310.50 ($270 * 115%)

Note that we multiply by 115% instead of 15%.  This is because we are amplifying a gain as opposed to a loss.

Factoring in lifetime customer value

Lastly, Example Machines knows that each new customer makes repeat purchases worth approximately $5,000 in revenue over their lifetime. It’s easiest to factor this into initial deal value.

• Average deal revenue: $3,000
• Repeat business over lifetime: $5,000
• Profit margin: 45%
• Lifetime profit-per-customer: $3,600 ($3,000 + $5,000)*(45%)

Then we can factor back in how many leads convert to a deal and word-of-mouth gains:

• Lifetime profit-per-customer: $3,600
• Leads that convert to a deal: 20%
• Gain from word-of-mouth: 15%
• Lifetime value-per-conversion: $828.00 ($3,600 * 20% * 115%)

How this enables more strategic bidding

Let’s assume 5% of clicks convert to a sales lead and see how this affects our value-per-click:

• Value-per-click (short term): $13.50 ($270.00 * 5%)
• Value-per-click (+word-of-mouth): $15.53 ($310.50 * 5%)
• Value-per-click (lifetime): $41.40 ($828.00 * 5%)

Notice how factoring in full conversion value enables Example Machines to consider a broader range of profitable CPC bids.