Value-Based Bidding in Google Ads: How to Use It Like a Pro

Value-based bidding (aka VBB) helps you bid on the most worthy conversions based on specific actions, offline behavior, location, audience segment, device, and more. Read on to learn how our experts use VBB to drive conversions daily.

Here, you’ll find: 

1. What is value-based bidding?
2. How to use value-based bidding: 5 key steps
3. Benefits of value-based bidding
4. Risks of value-based bidding

Everyone wants the most bang for their buck — especially us marketers. 

One way to achieve this in your PPC campaigns? Value-based bidding (VBB), one of Google’s automated bidding strategies, which maximizes your return on investment (ROI) with higher-quality conversions. 

But what if you don’t know which conversions are worth the most to your brand? Or how to set up this tedious account structure on your Google Ads account? 

Keep reading as we share the ins and outs of value-based bidding, with expert guidance from HawkSEM Director of Account Performance Jess Weber.

Value-based bidding prioritizes conversion quality over conversion quantity. (Image: Adobe stock)

 What is value-based bidding?

Value-based bidding is a Google Ads Smart Bidding strategy that prioritizes conversion quality over quantity. Weber elaborates:

“It’s how we communicate with Google’s bidding algorithm,” explains Weber. 

The official name in the drop-down menu of bidding strategies is “Maximize Conversion Value”. In contrast, other smart bidding strategies include “maximize conversions (numbers),” or “target cost per action (tCPA)”. 

But what does it mean to focus on value over volume? 

Here’s a basic example of how value-based bidding works. Let’s say you’re an ecommerce business and: 

• Customer #1 spends $500 on your products in one purchase and never returns 
• Customer #2 spends $50 on your products, but refers new customers to your brand and returns as a repeat customer over the next ten years 

Who would you rather target? At first glance, you might look at it as $500 versus $50. But value-based bidding focuses on the long-run value. Meaning? Customer #2 has more value and constitutes a higher bid. 

So you’ll bid higher for leads with customer #2’s attributes. 

Does that mean customer #1 isn’t valuable? Not at all. 

Value-based bidding would have you bid as low as possible to get more conversions for the best value possible. So while customer #1 isn’t as valuable as customer #2, they’re still worth targeting at the right bid (lower bid).  

Weber sees value-based bidding as a must for ecommerce businesses:

“They are basing success based on products and revenue coming from sales, and ultimately profit margins,” explains Weber. “Having dynamic values for each product and allowing Google to optimize performance via dollar values is best practice.”

Of course, ecommerce is just one example. Value-based bidding focuses on – you guessed it – value, which can appear in different audience segments, conversion actions, location, and much more for any type of brand. 

 How to use value-based bidding: 5 key steps

Think you just need to select your bidding strategy and launch your campaign to see VBB results? That’s just one step of the journey, but don’t worry, we’ll walk you through each step to reach peak ROI. 

1. Determine your business objectives
2. Gather your data
3. Select the right bidding strategy and budget for your campaign
4. Assign conversion values to your customer journey
5. Establish conversion rules

 1. Determine your business objectives

Just like something that’s valuable to one person is obsolete to another, value isn’t the same for every brand. As a seasoned digital marketing agency with clients across finance, education, ecommerce, and SaaS industries, we know this all too well. 

Your business objectives will shape the way you use value-based bidding because different conversion actions bring different kinds of value to your marketing campaigns. 

Some examples of broad business objectives and accompanying metric-based goals include: 

• More qualified reach: Double lead volume by 50% in the next 12 months
• Cheaper customer acquisition: Reduce cost per acquisition (CPA) by 40%
• More exposure: Increase website traffic by 80%
• More sales: Improve ad revenue by at least 20%

Weber points to business objectives as a key starting point for a successful value-based bidding strategy:

“It’s important for us as digital marketers to understand our clients’ business, including their business objectives,” explains Weber. “Knowing business objectives helps us develop a conversion strategy (whether with SEO, PPC or both) that is based on what is most important for the business, and helps us understand how long it will take us to get there from where the account currently is.”

Once you know what you want? Prepare for action with the right information.

 2. Gather your data

The beauty of Google Analytics is its comprehensive historical performance insights. You can access historical metrics from your bid strategy report like cost per click (CPC), return on ad spend (ROAS), conversion rate, and more from your previous search campaigns. 

Still, you’ll want to inform your value-based bidding strategy with the latest insights into your business. Weber points to:  

Offline conversions & first-party data from CRMs

Most of your customers might purchase your products online. But how much of the customer journey happens online, too? Weber says your audience’s activity offline is just as valuable to your value-based bidding strategy: 

“Did you know that Google collects information about what you are doing offline via your phone, and will store it on your device for days?” asks Weber. “So regardless of what we are doing online or offline, Google tracks where we are, where we are going, the patterns, what businesses we visit, what we’re saying, and translates all of that into the signals that are used in the bidding strategies.”

Offline behavior offers vital data for both ecommerce businesses, local businesses, and B2B businesses. Weber breaks it down: 

For ecommerce and local businesses

Let’s say you visit a pet store. Weber shares how Google Ads collects that in-person data: 

“You’re going to be put into a pet owner bucket, and your brick & mortar store visits are going to be reported to that pet store owner in Google Ads!” says Weber. “Even more scary, is that Google will learn over time how often you visit and will be more likely to advertise search ads to you when you are more likely to visit/convert.”

Now you have bidding strategies informed not only by online behavior, but also your day-to-day activities. But Google has increasingly tightened privacy policies to curb the intrusiveness of this type of data collection. 

For B2B businesses

Weber points to offline behavior as a hot aspect for B2B businesses’ revenue strategies:

“Conversions can come in, but conversion volume means nothing if they aren’t going to become customers,” explains Weber. “KPIs like CAC, MER, and actual revenue matter.”

That’s why it’s so important for B2B brands to import offline conversions from CRM software, or upload it manually.

Customer lifetime value (CLV) 

This metric estimates the total value of a particular customer’s purchases over time. It considers repeat purchases, order values, and the length of time they interact with your company. 

Average order value (AOV)

This measures the average purchase value of your customer’s purchases from your business. For example, suppose a customer purchases 10 products from you, with half of the products valued at $50 and the other half at $70. 

In this case, that customer’s average order value is $60. But the AOV metric averages out all your customers’ purchases historically.

Customer location

Notice your customers usually purchase your online products from the US and Mexico? Or perhaps even more specifically from urban areas in both countries? Naturally, Google might assign higher value to conversions from these places. 

Device

Is your customer purchasing products on their iPhone? Browsing on their desktop? Devices play an important role in value-based bidding data, especially for SaaS businesses, according to Weber: 

“SaaS is historically an industry where 90%+ of all the valuable conversions happen on desktop,” says Weber. “Decision-makers in the SaaS space are going to most likely be users on their laptop/desktop, meaning they’re usually not people sitting around on their phones.”

On top of that, we know that SaaS audiences tend to research products during work hours since they shop for their employers. This might encourage a SaaS brand to assess a higher conversion value to audiences with laptop/desktop as their device. 

Customer journey length

This measures the length of time it takes for a lead to transform into a paying customer. For example, an ecommerce business might have an average customer journey length of five days, while brands with more complex services (like SaaS products) often have longer customer journeys. 

ConversionIQ for data collection

So, we’ve covered customer journey length, device, location, AOV, CLV, offline behavior, and CRM data. Weber says all of these factors contribute to accurate value attribution to different conversions in the funnel. 

But what if you’re a new business without much data to begin with? Weber says that despite Google’s hundreds of audience signals and conversion data, account managers have more levers to pull: namely, insights from HawkSEM’s unique tech system, ConversionIQ:

“ConversionIQ comes into play because it allows us to visualize the entire funnel in real-time,” says Weber. “So in our CIQ dashboards, we can see the different stages of the journey from lead to customer, and utilize that data to adjust our conversion strategy and assign values to the different stages (think MQL, SQL, etc.) to help Google’s algorithm focus on the most valuable users for their business, ultimately increasing revenue and their bottom line.”

Armed with all the data? Time to start bidding. 

(Image: Adobe stock)

 3. Select the right bidding strategy and budget for your campaign

Step one? Select Maximize Conversion Value bidding strategy within your Google Ads account structure. You can let Google’s algorithm target conversions with the highest value, or optionally add a target return on ad spend (tROAS) as well. 

Remember, if you choose tROAS bidding, ensure it meets your business goals but you also want to be realistic. 

For example, if your historical ROAS has been 40% for the last few years, it’s a stretch to set your new target to 200%. That’s not an intangible result if you partner with a Google Premier Partner marketing agency like HawkSEM. Just look at how we increased our SaaS finance client TimeWarp Trading’s ROAS by 471%!

If you don’t have a target ROAS in mind, you can always opt out of that selection. In this case, you’d select a “daily bidding budget” aligned with your marketing budget. 

Here, you can also decide whether to set your strategy and target ROAS or budget for just one campaign, or across multiple campaigns. 

 4. Assign conversion values to your customer journey

Your sales funnel establishes all the steps your audience takes to transform from a casual browser into an invested buyer. This means you might have multiple conversions within the process, with some more significant for ROI. 

Let’s say you’re a SaaS business. Your funnel steps might have these conversion types:  

1. Visit contact page
2. Request information with form submissions
3. Sign up for a free trial
4. Subscribe to product

Now, you’ll need to assign the value of conversions for each step. Google walks you through it by asking you first what percentage of customers make it to each step in the journey. When you plug that info in, Google generates an estimated bid for each conversion:

But every business is different. Your business might value city dwellers over suburban families, for example. And if you’re a SaaS brand? Remember what Weber said about desktop users:

“We recommend that you bid down or assign negative value to mobile users vs bidding up on desktop,” says Weber. “This tells Google we don’t value mobile users as much, so it will avoid that traffic as opposed to still bidding on it, but also inflating desktop bids.”

 5. Establish conversion rules

Value has a lot to do with unique attributes about your target audience. This is where conversion rules come in, according to Weber: 

“Conversion value rules are a lever to pull to communicate to Google that certain users are more valuable to you based on their location, device, if they are in a certain audience, or if you want to add more value to brick & mortar conversion actions like store sales or in-store purchases,” explains Weber. 

The benefit? These rules basically tell Google’s algorithm what to focus on through conversion value, putting more (or less) emphasis on those signals. 

You can plug in more specific details about conversion value based on: 

• Location: A SaaS business might find more value in tech hubs like Austin, Texas or San Francisco, California because of the presumed networks of those audiences, meaning they’ll likely have a higher chance of referrals. So, you might bid higher for conversions from certain cities than others. 

• Audience behavior: Are you seeing a lot of conversion action on social? Or perhaps from those that have already visited your website more than three times? These are audience behaviors you can share with Google to double down on maximum conversion value.  

• Device: Let’s say your software is only compatible with Apple software. In this case, you might bid more for conversions from people with these devices over Androids, for example. 

So, what can you expect to see in your campaign performance with VBB strategies?

 Benefits of value-based bidding

Phew, that was a detailed process. But trust us; if you dream of sky-high ROI and a super-scaled business, it’ll be worth it. 

Here’s why: 

Better value data insights

Value-based bidding gives you attributional value to every bid adjustment, targeting criterion, ad group, and keyword. When we pair that with the machine learning prowess from our proprietary tech, ConversionIQ, our strategic insights make your PPC campaigns overflow with revenue. 

Increased conversion value

Google found that customers who switched from the Target CPA bidding strategy to target ROAS bidding (value-based) saw an average 14% increase in conversion value. Which means you’ll generate more revenue for every new conversion — sweet, right? 

Here’s how you can visualize the difference: 

Quicker results

Smart bidding automation saves hours in your workflow, especially when compared to manual bidding. As with all good things, there is a caveat: your targeting criteria and conversion values need to be super solid if you want to see actual results. 

That means you need accurate and abundant audience research and data-backed estimates for your conversion value to generate the ROI you want. A top-3% digital marketing agency like HawkSEM, which unlocks an average 4.5X ROI for clients can help with that. 

Of course, we can’t forget that every rose has its thorns. But in the case of value-based bidding, the thorns only grow with poor data collection.  

 Risks of value-based bidding

More strategic data insights and ROI in a quicker time period? Sign us up — but before we jump in, let’s consider a few risks. Namely, the risk of blowing through your marketing budget. 

Weber says a number of factors can be detrimental to account and campaign performance, meaning you might spend a ton of your marketing dollars without seeing the high-value conversions you’re after. Culprit #1?  Poor conversion tracking and value assessments:

“Situations where tracking or values are incorrect can lead to the algorithm focusing on low-value conversions, passing up what is really driving value to the business,” says Weber.

She also points out that brands with longer customer journeys (more than 90 days) risk poor data utilization as well: 

“The end of the journey falls out of the window where the data is useful for the algorithm, which means the most important data is never utilized,” explains Weber. 

The takeaway

Value-based bidding is the most effective Google Ads bidding strategy for long-lasting ROI. We’ve seen firsthand the phenomenal results that come from prioritizing high-value conversions, from drastically decreased CPAs to skyrocketing ROAS. 

The best VBB strategies are backed with impeccably accurate and relevant data on every move your audience makes. But translating that massive data library into a revenue-generating VBB strategy isn’t a walk in the park. 

Brands are often overwhelmed by the tracking, monitoring, and strategizing that this approach takes, and understandably so. 

That’s why we’re here to help. Ready to reap high-value conversions and serious ROI? We’re with you every step of the way. Let’s launch your VBB strategy together.