Value-Based Bidding Strategy Optimization For Maximum ROI

Value-Based Bidding Strategy Optimization For Maximum ROI

Value-based bidding is a strategy in Google Ads that helps you identify and prioritise customers and actions bringing the greatest long-term value to your brand. Unlike other strategies that optimize your bidding and ad placements based solely on the anticipated quantity of conversions, value-based bidding focuses on quality with the help of Google AI.

Online campaigns are a great way to grow your customer base and drive more conversions. But not all conversions are created equally. Value-based bidding strategies help you in reaching people who are likely to bring more value to your business.

Value-based bidding in Google Ads

Value-based bidding in Google Ads is a specialized type of Smart Bidding, where the focus shifts from conversion volume alone to actions like to bring the most value to your business. This strategy allows you to define what “value” means, whether it is sales revenue, profit margins, the likelihood of repeat purchases, or a combination of factors.

Incorporating metrics like revenue and profit enables Google AI to tailor your bidding and campaigns accordingly. By emphasizing the value of each conversion, guided by your first-party data and other relevant signals, value-based bidding allows you to adopt a longer term perspective and utilizing your marketing budget more efficiently.

Types of value-based bidding strategies:

Google Ads is offering two advanced value-based bidding strategies to help you grow your business and stand out from advertisers that use more basic approaches.

Maximizing conversion value strategy lets you define what a “valuable” customer means to your business. Google AI is optimizing your campaigns to prioritize those most likely to bring you the greatest return.

Target return on ad spend (ROAS) strategy helps you maximize the value of your conversions while also achieving a specific ROAS, ensuring your ads not only drive high-value conversions but also do so in a financially efficient way, delivering a strong ROI.

Evaluating Performance: Focus On The Value Metrics

Two key metrics are conversion value and average target return on ad spend (ROAS).

Conversion value represents the total value generated from conversions driven by your ads, and it is the monetary worth of the actions users take after clicking on your ad, whether it is a purchase, a sign-up, or a subscription. Average target return on ad spend (ROAS) is the traffic-weighted average ROAS that your bid strategy optimized for over a given time period. Make sure to add this measure from the column icon at the top of your campaigns table if it isn’t already there in your Performance table. Both conventional and portfolio bid techniques can use it.

Optimization: Balancing Efficiency and Growth

Target ROAS is like setting your cruise control. Adjusting your target ROAS influences how aggressively your bids compete in auctions. Higher ROAS means bids would be more conservative, and you will likely compete in fewer auctions. While a lower target ROAS enables more aggressive bidding, you will likely compete in more auctions and reach more customers.

Budget is your gas tank, and the amount of gas you put in depends in part on the bidding strategy you have chosen. Setting a target ROAS enables your budget to align with your target ROAS and allowing the system enough room to optimize effectively. With a maximize conversion value bidding strategy (without a target ROAS), the system aims to use all the gas you give it each day, prioritizing driving the highest possible value within a specific allocated budget.

Understanding The Relationship Between Your Controls     

Bid Limits

Tempted to set limits on how much you pay per click, like setting a maximum speed limit by setting bid limits. It is like trying to win a race while keeping your car below a certain speed. In value-based bidding, it is best to let the system automatically adjust your bids based on the potential value of each click.

Opt to set bid limits when you are getting started or are in a highly competitive sector, but keep these tradeoffs in mind as you evaluate performance. Note that bid limits are only used in Search Network auctions and are only available for portfolio bid strategies.

Budget Constraints: Ensuring Enough Fuel

To use target ROAS, make sure your budget is not constrained. Otherwise, it is like trying to drive a long distance with very little gas. A restrictive budget limits the system’s ability to participate in valuable auctions and achieve your desired return. The system needs a sufficient budget to effectively optimize for your target ROAS.

Optimization Tools include bid simulators, bid strategy report, performance planner, portfolio bidding & shared budgets.

Optimization is an ongoing process. As the business evolves and the understanding of your customers deepens, revisit your conversion values to ensure they still accurately reflect the worth of each lead. Adding “value” to your advertising strategies enables you to go beyond customer or lead acquisition costs, emphasizing driving return in your campaigns. You are now equipped with the knowledge and tools to bid to value. Emphasizing budget on finding the leads that align with your goals, driving meaningful results for your business.