In August 2019, Google released what is arguably one of the most impactful Google Ads features announced in the last few years to Google’s Smart Campaign Product Suite: a new Smart Bidding Strategy, “Maximize Conversion Value.”
This new Google Ads smart bidding strategy leverages Google Deep Learning (machine learning algorithms) plus historical client and account-specific performance data to help users maximize revenue while also allowing them to set a return on ad spend (ROAS) goal.
The ability to tap into Google’s massive data set, including years of user-level shopping patterns and in-market intent data signals across Google properties, in order to empower Google ads efforts by merchants is a game-changer.
eCommerce merchants can now leverage this new Smart Bidding Strategy to focus on maximizing revenue generation for campaigns rather than focusing purely on ROAS or transactional volume, freeing up this extra time for strategy and higher level marketing needs.
What Is Google’s Target ROAS?
Google’s Target ROAS bidding allows advertisers to bid in auction while aiming to hit a specified return on ad spend. Within the Target ROAS bid strategy, bids are automatically optimized at auction time to produce your desired ROAs goal. Target ROAS bidding allows your campaigns to achieve maximum return by learning how users interact with your keywords.
What Is Google’s Maximize Conversion Value?
Google’s Target ROAS and Maximum Conversion Value both aim to achieve highest efficiency and return within your campaigns. However, Maximum Conversion Value differs in that you can specifically maximize KPIs such as sales, revenue or profit margins while Target ROAS is solely focused on achieving a return on ad spend goal. For this bid strategy, every conversion must be assigned a conversion value. Advertisers do have the ability to run Maximize Conversion Value with or without a Target ROAS focus. Utilizing this option provides an additional layer of ROAS bidding to reach your lower funnel strategy goals. When Maximize Conversion Value with a ROAS goal is selected campaign performance will be similar to Google’s Target ROAS strategy.
The Stable’s team leveraged different types of Smart Bidding campaigns while in Beta for many of our clients and exceeded goals and saw stronger monthly ROAS and transaction scale than in previous months. A handful of the Stable clients had record breaking months as a result of Smart Bidding campaigns.
To put the magnitude of this new feature into perspective, the results speak for themselves. We tested Smart Shopping campaigns for numerous clients and have seen as high as a 130% increase in ROAS at a 105% higher spend. We have also tested Maximize Conversion Bid Strategy in Adwords with The Stable clients and saw a 26% higher ROAS.
What’s the Difference Between the Target ROAS Bidding Strategy and the New Maximize Conversion Value Bidding Strategy?
The Maximize Conversion Value bidding strategy takes order value into consideration just like target ROAS, but will automatically try to maximize the value. But does that mean target ROAS is going to be forgotten? No! And as a merchant, you most definitely should not forget either strategy.
According to Google, “This automated bidding strategy helps you maximize the total conversion value of your campaign within your specified budget.” The key part to note from Google’s statement is, “within your specified budget. What does this mean? If the campaign has an open budget (i.e.: $500 daily budget, but spends only $200 due to ROAS goals) switching to Maximize Conversion Value will most likely push the campaign to spend more.
To better explain this, let’s look at two scenarios:
- Scenario 1: $200 daily spend & $300 revenue = 150% ROAS
- Scenario 2: $300 daily spend & $320 revenue= 106% ROAS
In this example, Maximize Conversion Value bidding strategy is more likely to go with Scenario 2 if there is no ROAS goal set because $320 in revenue (Scenario 2) is obviously greater than $300 in revenue (Scenario 1), even though the ROAS is lower. Understanding this, it’s easy to see how important it is to set the new bidding strategy correctly.
In order to utilize the Maximize Conversion Value bidding strategy and expected results, it’s important to adhere to these considerations:
- Set a ROAS goal to be on the safe side
- Decrease your open daily budget to daily spend average and start testing it out
- Try out the campaigns that are limited by budget without setting a ROAS goal
When to Use Maximize Conversion Value
Max Conversion Value with No Target ROAS can be utilized if you: cannot assign a value to every conversion action for your campaign and/or you have no specific ROAS goal. This bid strategy is ideal for advertisers who want to optimize towards lower level KPIs such as revenue and ROAS, but don’t have a specific ROAS in mind. Using the algorithm, Google Ads will optimize and bid to efficiency given your keywords, ads, geo targets and audience selections.
Limited Budget Campaigns
If your campaign is limited by budget and you are already happy with the performance (assuming you don’t have more budget) try using the Maximize Conversion Value bidding strategy without setting a ROAS goal. This way, max conversion value means max ROAS.
For example, let’s say your limited daily budget is $200 and your revenue goal is $300. In this case, it’s ideal to increase your budget if you are happy with the ROAS. But, chances are, you don’t have more budget. The next best thing to try would be to increase the Target ROAS until the campaign stops losing impressions share.
Well, the good news is, Maximize Conversion Value will now automatically do this for you! It will go after a higher revenue goal in this case, which means higher ROAS (remember the daily budget is limited in this scenario).
That being said, ROAS and revenue are not the most advanced eCommerce goals. Why? Because higher ROAS don’t necessarily mean higher profit.
Let’s look at two scenarios to investigate this concept further:
Which one is the best scenario? ROAS-wise, it’s Scenario A. But is it really the winner? Let’s calculate the profit based on the profit margin.
Scenario B generated a higher profit than Scenario A although it has a lower ROAS. Based on this example, lower ROAS could be better profit-wise.
Scenario C generated the highest revenue at a lowest profit. Meanwhile, Scenario A generated the Highest ROAS at a lower profit in comparison to Scenario B. This could be the case for your campaigns as well.
Is Scenario C the worst-case scenario here? We can’t really tell without looking at the new vs. returning customer ratio. If it’s generating more first-time customers compared to other scenarios, it could be more beneficial in terms of CLTV and long-term profit.
Using Maximize Conversion Value With Target ROAS
You’ll want to use Maximize Conversion Value with Target ROAS if you can accurately assign a conversion value to each conversion action. While you may assume that higher ticket products may perform better within this bid strategy it may be true that smaller ticket items sell more frequently, producing a higher conversion value or return. For this reason, it is important to recognize that the combination of higher and smaller ticket value items may produce a positive return when working in conjunction with this bid strategy. Target ROAS in Google Ads works similarly, but since you don’t need to assign a conversion value for conversions within the Google Target ROAS bid strategy advertisers may find that Maximize Conversion Value with Target ROAS provides truer results.
Customer Lifetime Value (CTLV) is also important to consider. By looking into data, you can identify the average spend per customer. For example, let’s say based on the data, the average spend per customer is $300 (including repeat purchases). Therefore, it wouldn’t hurt to spend $200 at a negative ROAS to win a new customer.
Now, using the Maximize Conversion Value bidding strategy, you can create a separate campaign for acquisition, exclude all the previous converters, site visitors, branded terms and use target cost per acquisition (CPA) (under average customer spend) to win new customers!
The Stable’s SEM Team Can Help
The Stable’s team has leveraged different types of Smart Bidding campaigns for many of our clients and exceeded goals, saw stronger monthly ROAS and transaction scale than in previous months. A handful of The Stable’s clients had record breaking months as a result of Smart Bidding campaigns.
To put the magnitude of this feature into perspective, the results speak for themselves. We tested Smart Shopping campaigns for numerous clients and have seen as high as a 130% increase in ROAS at a 105% higher spend. We have also tested Maximize Conversion Bid Strategy in Adwords with The Stable clients and saw a 26% higher ROAS.
To get started on your pay-per-click marketing strategy, get in touch with our team and we can review your challenges and opportunities on Google and Microsoft.