Conversion Value in Google Ads: Why is it Important

So you’ve been running your Google Ads account for some time and are looking for ways in which you can bring your campaigns up to the next level. You may be asking yourself, “Aside from routine optimizations and maintenance like search query reports, negative keyword lists, et al, what else can be done?”. 

One of the key components to any successful evolution of a Google Ads campaign is to have a clear understanding of how much each conversion is worth to your or your clients’ business. In short, what conversion values are in your google ads. By giving Google the data it needs to understand your business, you can leverage powerful tools like advanced bid strategies, quick and real-time Return on Ad Spend (RoAS) metrics, as well as total profitability. 

Depending on which type of business you’re managing, some nuances of measuring conversion value in Google ads may change, however, the core principles remain the same. Telling Google Ads how much your conversions are worth will help generate greater performance.

Determine Your Line of Business

Depending on what kind of business you operate, how revenue flows through your company’s coffers will differ. In the case of an e-commerce business, a conversion (or sale) is a direct step to revenue. In the case of a Software As A Service (SAAS) company where new leads, demo downloads, and newsletter subscriptions may be considered the first steps of a lead nurturing journey, there are some additional steps to determine a conversion’s proxied value. 

A few other things to consider if your company’s KPIs are based on lead generation are average lifetime customer value, new lead to subscriber ratio, and proxied values for each step of the way. No matter how complicated the conversion process may be, there is a way to measure it!

Evaluate and Measure the Value of Your KPIs

A business’ lifeblood is revenue. Giving conversion value data to Google enables the full suite of automation and bid strategies to work to your advantage. Once you’ve determined your line of business, you can begin evolving the strategic prowess of your Google Ads campaigns. 

An important note: if you are unconfident in your website editing abilities, you may wish to seek the help of a web developer for the next steps; it is vital that the tag or pixel are installed correctly, and the revenue values are reflective of real, tangible results, otherwise a cascading effect of broken telephone may end up skewing results in Google Ads. Some common mistakes may include double-counting conversions, incorrect revenue values (post-shipping+tax values), and failure to trigger. The implementation steps will also differ slightly depending on the line of business your company works in, but follow along with the steps that define your company and you’ll have your account humming along in no time!

• E-commerce Campaigns
  • Identify the business website’s CMS
  • Determine whether Google Ads or Google Analytics revenue tracking is more appropriate for your business
    • Follow appropriate steps to ensure the Google Ads pixel, or Google Analytics Global Site Tag has been implemented properly
  • Run a test conversion to verify that the campaigns are attributing value properly

• Lead Generation Campaigns

The steps remain mostly the same for Lead Generation campaigns when it comes to setting up your website and associated Google Ads accounts for success. One very important distinguishing factor is to consider what the value of a lead is, relative to the value of a converted user. 

One great resource you can use is Google’s Growth Formula for Lead Generation Campaigns. The industry they use in their example is for an insurance quote campaign, but feel free to use the template to determine what each lead is worth for YOUR business. Calculating value (even highly conservative proxied values) can be extremely helpful in teaching Google’s automation to bid strategically, to users that demonstrate high conversion intent. 

An important note: you will need to communicate with your business analytics team to determine fully-fledged converted percentages from each conversion action. Some questions you may wish to ask them to include:

• Which product or service is worth the most to the business?
• What is the average lifetime customer value (LCV) of each of these?
• Which lead type ends up converting as a customer at the highest rate, and what is that conversion rate?
• What about secondary, or tertiary conversion actions?
• What is that product worth to the business in revenue/profit?

With the above established, you can more seamlessly integrate the steps below.

• Calculate your business’ value of each separately tracked conversion action (request a quote, contact us, newsletter signup, etc)
• Identify the business website’s CMS
• Determine whether Google Ads or Google Analytics goal tracking is more appropriate for your business
• Follow appropriate steps to ensure the Google Ads pixel, or Google Analytics Global Site Tag are entered properly
• Run a test conversion to verify that the campaigns are attributing conversions to the proper campaigns

It’s important for you to assign values to each conversion action, even if they’re conservative estimates. It’s always better to underestimate than it is to not have any direction at all! 

Let’s run with Google’s example of insurance sales. In this example, an average Phone Caller will convert at a 1% rate, while the average Quote Request Submitter will convert to a fully-fledged customer at a 5% rate. Let’s say that a new customer has an LCV of $5,000. If the above is true, a phone call can be valued at $50 (1% of a new customer, valued at $5,000), and a Quote Request can be valued at $250 (5% of a new customer, valued at $5,000). 

Using proxies in this way can help the Google system obtain an equivalent proxied value of lower priority conversions as higher priority conversions. If our daily spend is $1,000, the system knows now that it must generate a minimum of 20 phone calls, or 4 Quote Requests per day in order to generate a positive RoAS. 

Evolving Your Campaigns By Adding Conversion Values

Once the above steps are completed, you may wish to begin implementing a more advanced form of bid strategy. You can also now add columns into your campaign view; you can now add and fully utilize columns like Conv. Value (or Revenue if you linked through Google Analytics), Conv. Value / Cost (more commonly known as Return on Ad Spend/RoAS), as well as Value/Conv. (commonly known as Average Order Value). 

The last of which is particularly important for e-commerce businesses that offer free shipping. Any campaigns (which may be organized by product groupings) that fall below a certain level of profitability may be re-tuned via utilizing a Target RoAS bid strategy. Keep in mind that a highly aggressive RoAS target may send the system into a negative feedback loop and leave campaigns unable to spend, so make adjustments slowly, see how performance responds over the next week or two, and make further adjustments if needed. 

Utilizing Target RoAS bid strategies is a great way to optimize ecommerce campaigns. Although not originally designed for lead generation purposes, you can use this highly sophisticated technology for optimizing your lead generation by thinking a little bit outside the box. It’s important to see the tools we use as digital marketers for their function, rather than their intended purpose.

Developing, implementing, and managing a successful paid ad campaign can seem daunting when doing it on your own. NAV43 is a digital marketing agency that specializes in Paid search strategy. Give us a call today to find out more.