Value-based bidding (VBB) is revolutionizing performance marketing, especially for industries with extended purchase cycles like higher education or B2B. This strategy focuses on maximizing return on investment (ROI) through smart bidding strategies that prioritize the value of conversions over mere clicks or impressions.
Google Ads’ reliance on conversion data from the previous 14 days for bidding optimization poses a significant challenge for clients with longer sales cycles. To address this, an innovative method like value-based bidding is essential. VBB involves scoring leads based on their predicted value, thus enabling more accurate and effective bid optimization.
What is Value-Based Bidding?
Value-based bidding is an advanced bidding strategy that adjusts bids based on the expected value of conversions rather than just clicks or impressions. This method ensures that marketing efforts are directed toward achieving high-value outcomes, ultimately leading to more efficient ad spend and higher profitability.
How Does Value-Based Bidding Work?
Value-based bidding utilizes algorithms to predict the potential value of a click and adjust bids accordingly. Here’s how it works:
- Lead Generation: A user fills out a lead form, which creates a lead that is sent to DataHQ.
- Lead Scoring: The lead is scored based on predictive factors. For higher education, for example, this includes campus, match type, device type, day of the week, and hour of the day. This scoring compares the baseline lead-to-enrollment (LTE) rate to the LTE rates of various dimensions known to be predictive.
- Data Integration: The following day, the scored lead is imported into Google Ads with the score as the “Conversion Value.”
- Campaign Optimization: With a few tweaks to campaign settings, these scored leads inform optimization using the Max Conversion Value Strategy.
Types of Value-Based Smart Bidding Strategies
Value-based smart bidding strategies in Google Ads optimize for the value of conversions. The two main strategies are Max Conversion Value, which maximizes total conversion value within a budget, and Target ROAS, which aims for a specific return on ad spend. These strategies ensure your budget maximizes overall conversion value rather than just increasing the number of conversions.
To understand what the two types of value-based smart bidding strategies are, we’ll explore What Target CPA and Target ROAS value based bidding strategies are, and when to use them in your Google Ads campaign, in more detail
Value based bidding strategy #1: Target CPA (Cost Per Acquisition)
What is target CPA?
Target CPA sets bids to help get as many conversions as possible at the target cost per acquisition you set. It uses historical information about your campaign and evaluates the signals present at auction-time to find an optimal bid for your ad each time it’s eligible to appear
When to use target CPA
Use the Target CPA bidding strategy when you have a lot of conversions each month and aim for a predictable cost per acquisition. This strategy focuses on achieving your CPA goals by only targeting conversions that meet your criteria, making it ideal for maintaining a specific CPA target.
Value based bidding strategy #2:Target ROAS (Return on Ad Spend)
What is the target CPA bidding strategy?
Target ROAS sets bids to maximize the conversion value while trying to achieve an average return on ad spend equal to the target you set. This strategy is useful when you value some conversions more than others, as it allocates the budget to get the most valuable conversions.
When to use the target ROAS bidding strategy
Use a Target ROAS bidding strategy when your Google Ads conversions directly drive revenue, such as online sales for an e-commerce store. Assign values to your conversion actions to reflect this revenue. Avoid using tROAS if your conversions do not generate a direct return on investment, like ebook downloads or free tools.
What Does Value-Based Bidding Do?
Value-based bidding helps in achieving more efficient and profitable ad spend by:
- Prioritizing high-value leads
- Enhancing bid accuracy
- Improving overall campaign performance
Value-Based Bidding in Google Ads
Google Ads implements value-based bidding through strategies like Target CPA and Target ROAS. For instance, a case study involving one of our higher education clients revealed a 20% increase in enrollments and a corresponding 20% decrease in cost-per-enrollment (CPE). Additionally, the cost-per-lead (CPL) also decreased, indicating a more efficient allocation of the advertising budget.
Value-Based Bidding on Meta (Facebook)
Facebook value-based bidding works similarly to Google Ads, adjusting bids based on the predicted value of a conversion. This method has proven more effective than traditional bidding strategies on Meta platforms, leading to higher ROI and better resource allocation.
Bidding Based on Value in Auctions
Value-Based Bid Auction Definition: This is the process of bidding based on the expected value of a conversion rather than just the cost per click. It involves:
- Assessing the potential value each lead can bring.
- Adjusting bids to prioritize high-value leads. This method ensures that ad spend is directed towards the most profitable outcomes.
Practical Tips for Implementing Value-Based Bidding
- Set Clear Goals: Define your target CPA or ROAS based on your business objectives.
- Monitor Performance: Regularly check your campaign performance and make adjustments as necessary.
- Utilize Historical Data: Leverage historical data to predict conversion values and optimize your bids.
- Test and Learn: Continuously experiment with different strategies and measure their impact to refine your approach.
Value-based bidding exemplifies the integration of creative experimentation and data-driven insights—key principles in modern performance marketing, and certainly foundational values here at Level. This approach, championed here by Level Senior Digital Marketing Manager Giordan Tobia, not only enhances the accuracy of bid strategies but also maximizes the return on investment for clients with longer sales cycles. At Level Agency, we’re committed to pioneering such innovative strategies to drive unparalleled results for our clients.
