Google Ads Explained: Value-Based Bidding

and is it worth it?

Now that you’re all over Smart Bidding, we’d like to get you up to speed on the next rung in the ladder on the journey to ROI.

That next rung or step is Value-Based Bidding. You may have seen the term when setting up conversions or looking at new recommendations in Google Ads. The question is, what the heck is Value Based Bidding?

Value-Based Bidding uses Smart Bidding strategies to optimize for value to reach business goals like profit, revenue, and customer lifetime value. This type of bidding leverages the following metrics:

• Conversion value
• Return on ad spend (ROAS)

If you’ve been around for a while, you may be a little skeptical of new bidding solutions after experiencing Smart Bidding’s inconsistent performance in the early days.  Thankfully, Smart Bidding’s tumultuous teenage years seem to be over, and splicing in bid adjustments for higher-value clicks is working well for helping advertisers reach higher-value customers. 

What Does Value-Based Bidding Do?

Value-Based Bidding brings meaningful values to Google Ads Smart Bidding. Including value for your conversions teaches the algorithm what’s important to you. (Something a few husbands have yet to learn.)  When Google Ads better understands your goals, it can effectively optimize your campaigns. It’s a bit like weighted grades for advanced classes in school.

Value-Based Bidding allows you to:

• Differentiate your customers with the information you share
• Teach Google which customers are more valuable than others
• Improve your conversion value and increase profitability

How Can Google Ads Help?

Google Ads can help you advance your business goals with Value-Based Bidding. When bidding to value, you’ll be able to connect your results to real business goals rather than cost per conversion or return on ad spend. Using the key performance metrics (KPIs) that make sense to the CEO means that your ads will be more in line with your P&L and less abstract to the one signing the checks (which might be you). Some of the important business goals this bidding acts on are:

• Market share
• Volume
• Revenue 
• Profit

Data Capture Throughout the Customer Journey

Data is what makes Smart Bidding effective. When you add value (static or dynamic) to each step of the journey, Google Ads knows what actions your company finds beneficial. It’s vital that Google knows how much each activity plays into growing and scaling your ads and your revenue.

Start with brand awareness activities (also known as micro conversions) like page views, time on site, newsletter signups, and the like. These are the stepping stones to conversion. Then, ensure you’ve given proper weight to form submissions, phone calls, and qualified leads.

Don’t let the measurement end there though. Offline actions also need to be measured if you want to capture each step in the customer’s journey. This includes offline sales, store visits, and driving directions.

Now that you’ve gathered this data with its proper weight and a better picture of your customer, you can work towards your business objectives.

From the Customer Journey to Real Business Objectives

How does Value Bidding assist in reaching business objectives? Based on your inputs, it does the following

• Optimizes for products that drive the most profit and assigns different values for products
• Sets an average value for store visits so Smart Bidding can maximize sales across all channels, both online and offline
• Improves lead quality by differentiating the value of actions like online quotes versus signed contracts

Finally, you can tell Google what leads (or sales) are the best for you and optimize every part of your account for it.

What’s Smart Bidding Doing in the Background?

Once Google Ads has a better understanding of your goals and priorities, it can begin optimizing various parts of your campaigns, starting with your cost per click. Using your goals as a guide, bids are optimized for time of day and adjusted to hit ROAS or cost per acquisition (CPA) goals. With your provided data, Google knows which levers to pull. Changes are made at the time of the auction to help you hit your goals.

Wrap Up

If you’re looking to tie your advertising to your real-world numbers and business goals, then Value Based Bidding provides you with the power you need. Feeding Google meaningful data is a lot like having a private chef that knows your food preferences and desired meal times before providing you with a menu. Previously, marketers have never had this level of control to drive conversions that mean the end goal rather than just being an empty lead. These new inputs will save you time and money if appropriately utilized.

Interested in knowing more about Value Based Bidding best practices? Keep an eye out for our next post!