The Essence of Conversion Value in Google Ads
Conversion value is a metric in Google Ads that helps you figure out the monetary worth of the conversions your campaigns generate. Unlike basic conversion tracking, which merely counts how many conversions you’ve achieved, conversion value gives you insight into the actual revenue impact of your ads (Google Ads Support).
This metric is particularly beneficial for businesses that sell products or services at different price points. For example, an e-commerce store with items priced anywhere from $10 to $500 will find it much more useful to track the actual revenue rather than just the number of conversions (AdsBot). By using conversion value, advertisers can assess not only the quantity of conversions but also their quality—ensuring that their ad spend is focused on the most profitable actions (WordStream).
Should You Use Conversion Value?
In short: Yes! If your business is keen on maximising profitability instead of merely counting conversions, tracking conversion value is essential. It allows advertisers to transition from a focus on quantity to a focus on revenue, making campaigns much more effective (WordStream).
For example, with Maximise Conversion Value bidding, businesses can let Google’s algorithm do the heavy lifting by directing budget to the keywords, audiences, and placements that yield the highest revenue (Traction Marketing). This is particularly advantageous for industries where customer lifetime value can fluctuate significantly, such as SaaS or luxury goods.
For businesses focused on lead generation, figuring out conversion value can be a bit more complex than it is for e-commerce. Instead of just looking at direct sales, companies should evaluate values based on things like the quality of leads, how often those leads convert into sales, and the overall lifetime value of a customer (Google Ads Support).
Take, for instance, a scenario where 20% of leads become customers, and each customer brings in an average of $500. In this case, you could assign a value of $100 to each lead (Lunio). This method helps ensure that your advertising budget is spent on the most promising leads, rather than just chasing after a high volume.
How do you figure out the conversion value?
It’s all about putting a specific dollar amount on each conversion action, based on how much revenue you expect it to bring in (Google Ads Support). Here are a few methods to help you calculate it:
Revenue per Conversion: If you’re running an e-commerce site, just look at the actual transaction value. For instance, if a customer buys something for $100, then that’s your conversion value (WordStream).
Estimated Customer Lifetime Value (LTV): For businesses that have repeat customers, like subscription services, it’s better to estimate LTV instead of just focusing on one-time sales (Blobr).
Average Order Value (AOV): If your business doesn’t have a set price for each conversion, you can use AOV based on your historical transaction data as an alternative (Josiah Roche).
Once you’ve figured out these conversion values, make sure to implement them in Google Ads. You can also take advantage of automated bidding strategies like Target ROAS (Return on Ad Spend), which helps you focus on high-value conversions instead of the lower ones.
Unlocking the Power of Conversion Value
Understanding conversion value is crucial for businesses aiming to boost revenue instead of merely chasing KPIs. It empowers advertisers to gauge the real impact of their Google Ads campaigns, making sure they spend their budget wisely. By keeping an eye on and fine-tuning conversion value, companies can make more informed bidding choices, ultimately enhancing their ROI. Some key ways to assess conversion value include tracking direct revenue, customer lifetime value, and average order value. Businesses that strategically leverage conversion value can really get the most out of their Google Ads investment.
At Dadek Digital, we’re all about helping businesses set up, monitor, and optimise conversion value in Google Ads. Our know-how guarantees that your campaigns do more than just attract clicks—they actually contribute to meaningful business growth. Ready to take your ad performance to the next level? Let’s chat!