5th July 2021

The benefits of Value Based Bidding in Paid Search

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Sam Akester
PPC Manager
Read time: 3min
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We explain how tROAS can deliver higher conversion values in a volatile market 

Automation in search has evolved massively since it was first introduced. Using smart bidding is highly effective at driving great results, and it shows when you consider the number of accounts that now use it. According to Google, more than 80% of Google advertisers are now making use of automated bidding. 

One area of smart bidding that Google has increased its focus on is the use of “Value-Based Bidding”. A common strategy that non-eCommerce companies (i.e., lead generation focused companies) use is Target CPA. This is a valid strategy to use, but as leads have different values to different businesses it is good practice to test a value-based bidding strategy such as Target ROAS too, as it may help a company drive more high-value conversions. 

According to Google, on average, advertisers that switch from Target CPA to Target ROAS can achieve 15% more conversion value at a similar return on ad spend. Before you get started on testing this strategy, here are some tips to help you drive the best results you can. 

  • To opt into Target ROAS, you should have at least 15 conversions in 30 days per campaign.  

  • For new campaigns, it’s recommended to start off with Maximize conversion value but then switch to target ROAS when you meet the threshold to use it. 

  • If your business relies heavily on offline conversions, it is important that you import the right conversion action into the account. Ideally, you would import the final sale, but if this is not possible, then import the action closest to the sale.  

  • It is also important to assign values to the different sales or lead types.  

  • First, work out the average value of a final sale or the expected customer lifetime value (LTV).  

  • Next, calculate your conversion rate and use the LTV or expected value of a sale to work out your expected value per sale. 

  • Control your spend through the target and remain uncapped. This means that you can still have a spend cap that works depending on the ROAS target that you set. The higher the target set, the fewer auctions you may feature in. However, you will want to make sure that your budget cap is set high enough so that if demand switches and there is an opportunity to drive a larger volume of results within your target, then Google can go after it. This might feel risky, but this is what the automated bidding technology is all about – it will do its job.  

  • Choose campaigns at first that are achieving less than 75% impression share as this allows for the machine learning to have headroom to increase value. 

The graphs below show perfectly why Google is pushing for more use of value-based bidding. Value-based bidding is more flexible and able to push and pull bids in the right moments to go after those higher-value conversions. What's more, using tROAS will also mean that bid values can be pulled back to suit the potential of a lower value conversion. This will help in the growth of sales and account efficiency. 

 

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Setting up your ROAS targets 

  • Target ROAS allows for you to set a return on ad spend target on your campaign. For example, £5 in conversion value divided by £1 in investment x 100% = 500% target ROAS 

  • Set your Target ROAS based on historical performance. Do this by using the Conv value/cost column. 

  • You will want to set a ROAS target that is equal to/ lower than the 30 -day historical ROAS you may have been achieving. 

In these times of uncertainty, making use of smart bidding is more important than ever as it allows you to adjust to dynamic auctions and demand volatility. It is also able to adapt and take into consideration shifts in search trends more quickly. The technology will go after more auctions if it spots the opportunity to do so while converting efficiently. Finally, it gives you control in setting targets and budgets that you are comfortable with, and Google will use machine learning to drive you the best results possible for the budget you have. 

If you need help setting up your account with value-based bidding or want to get the most out of your bidding strategies, then please get in touch!