Everybody aims for the low-hanging fruit in paid marketing to get more conversions. But even customers who cost more to be acquired are worth it, as they have a higher lifetime value (LTV). That’s a tactic you’d want to try out as long as you don’t spend too much on pursuing those users.
With this idea, value-based bidding automates the process of bidding and optimizing for the best results.
Anytime Mailbox (ATMB) and Hop Online work together to strengthen the foundation of ATMB’s account and experiment with different tactics to capture and better target high-quality opportunities.
Value-based bidding allows Google’s advanced machine learning to focus on the total conversion value and quality of people who see your ads across the platform’s huge ecosystem of advertising networks.
When you just measure CAC (customer acquisition cost), you take all of the users and all of the conversions under one basket.
The main problem with focusing solely on CAC is that you fail to look into the quality of the customers that, in the long term, would bring you more revenue.
VBB high-value prospects will have more budget directed their way, while those who share qualities of lower value, will be pursued less aggressively. Prioritizing segments based on value can be a good strategy to maximize the return on your spend even if you have a tiered, license- or usage-based pricing model. In fact, value-based bidding for SaaS companies is a great way to make sure you don’t leave money on the table by optimizing for a blanket average conversion value.
When running an automated bidding model like target CPA (target Cost Per Acquisition), you’re telling Google that all leads are worth the same. By doing so, you risk under-investing in your most profitable prospects and, in the long run, this can cause you to fall behind the competition.
With value-based bidding, you’re telling Google that you rather have high-quality leads, and the algorithm will give them to you.
If you’re running tCPA campaigns, chances are, Google will gradually start giving competitors who are bidding to value the higher-quality leads and funnel the low-quality leads to you.
A cloud-based platform, Anytime Mailbox allows users to view and manage their mail anywhere in the world, on any device, and at any time. You can select one or more addresses to set up your digital mailbox. At the moment, ATMB has over 1500 locations across the globe.
Being 10 years on the market, ATMB wanted to invest in marketing more efficiently and get the support needed to succeed.
Together, ATMB and Hop Online built a digital approach to take the account to the next level.
A VBB strategy is like a roadmap and, while it’s not set in stone, its guidelines help us get from measuring success through CPA and CAC to maximizing conversion value so that the client can spend more of their budget acquiring customers most likely to bring profit to the business.
While every business faces different challenges, following the steps below enabled us to build a clear, methodical VBB strategy that allowed us to uncover the most valuable sources of traffic for Anytime Mailbox.
Let's walk through the steps we followed together with ATMB.
Anytime Mailbox and Hop Online collaborated to map out the conversion journey. This was a crucial first step that helped set the foundations for value-based bidding. It swept away foggy notions and assumptions about how prospects move through the funnel, allowing us to create an overview of the customer experience and remove obstacles to make the process more efficient. This step took into account ATMB’s different pricing plans and the business’ different types of users and their behavior.
Although ATMB’s old conversion was tracking new user registrations, it did not have any assigned value. In order for Google’s algorithm to prioritize more profitable conversions, however, we needed to assign a value to each conversion. Deciding what numbers to use when assigning conversion values for VBB, though, can be tricky.
One major advantage at this stage was Hop’s data science team. The team went above and beyond to examine years of data and figure out the main factors that gave out information about the type of user, their behavior, and their lifetime value.
Connecting the dots also helped us set the base for true value-based pricing – making better-informed decisions about the profit maximizing price and creating an experience that’s aligned with the customers’ expectations.
Once you start feeding the algorithm updated and relevant data – and the new conversion is working as expected – you can turn off the old conversion.
In the case of Anytime Mailbox, we let the new conversion gather data in the background for a month and, once the numbers of the new and old conversion aligned, we made the switch. This way, we asked Google’s algorithm to deliver the same results, but do so based on different characteristics.
While there may not be any “obvious” changes, this was another key part of the process of moving to VBB. By turning on the new conversion, Google can see not only the number of leads but also their quality and value.
As a rule of thumb, you need to give Google’s algorithm some time to learn and establish new baselines. It’s best to give it 1 to 2 weeks to go through the ramp-up, learning period.
Note: When making decisions about your campaigns, it’s important to consider data from that period forward.
Depending on your business goals – increase in revenue or improvement on ROAS – you can switch over to one of two value-based bidding strategies:
Our primary goal with ATMB and value-based bidding is to, ultimately, target a specific return on ad spend. To get there, we need to test out the tROAS strategy and identify the campaigns in which it can be effective.
Unlike maximize conversion value, however, testing tROAS requires a minimum conversion volume (30-50 per month). As Anytime Mailbox started out with a low volume, we needed to test out maximize conversion value and meet the conversion volume threshold first.
In effect, this is enabling us to build up data that can be used as a stepping stone to test out target ROAS.
Partnering with Hop Online is certainly paying dividends for Anytime Mailbox. Here’s a quick overview of the results and insights.
To put the magnitude of value-based bidding into perspective, let’s walk through the results we achieved during the first VBB experiments with Anytime Mailbox:
Although there were expansions across multiple middle and top of funnel campaigns and audiences, the average CPCs remained stable. Compared to the ad spend increase (20%), we achieved a faster conversion value growth (30%), indicating that the experiments were successful.
Note: Each VBB experiment needs to be at least 6 weeks long – 2 weeks for Google to set the baseline for the algorithm and 4 weeks for the experiments. For Anytime Mailbox, we ran the experiments during the span of 3 weeks, with each test running for 6 weeks.
While our goal for ATMB is to, ultimately, target a specific ROAS, this strategy has a minimum conversion volume requirement. This is why we A/B tested, and continue to test, target CPA versus VBB (both tROAS and MCV).
This helps us to determine whether it’s best to run campaigns on tCPA or MCV in order to collect enough data and be able to apply a tROAS strategy.
The first testing batch included 6 experiments. Here’s what we found out:
Overall, considering the mechanics of both VBB strategies (MCV focusing on conversions + conversion volume and tROAS focusing on higher ROAS), we can conclude that 5 out of the 6 tests were successful.
ATMB and Hop Online worked together to create several experiments with the two different VBB strategies. Here’s what we learned from implementing VBB with Anytime Mailbox:
Moving from marketing goals to business objectives, having the skill to test and optimize, and the staying power to observe returns gave our client what they wanted and much more – improved ROAS, higher ad spend, and a boost in conversion rates.
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Value-based bidding (VBB) is a Google Ads automated bidding strategy that helps advertisers maximize the conversion value of their ad spend.
VBB comes with two main bid strategies – Maximize Conversion Value and target ROAS.
By considering a variety of signals, such as intent, user location, and expected CPC, maximize conversion value bidding strives to bring in conversions that will give the highest return.
With target ROAS bidding, Google will predict future conversion and conversion value performance based on historical data. The bids are adjusted in real time to maximize conversion value while aiming to achieve a specific ROAS goal.
Historically, bidding for higher revenue and value has been reserved for e-commerce.
That said, while the value of a lead in lead gen businesses is often harder to determine, once you move past that mental block you’ll see that VBB has plenty to offer for lead gen.
If you have a very low conversion volume, due to either your budget or your campaigns being brand new, VBB might not reap any noticeable benefits.
To implement value-based bidding the right way, start by setting up conversion tracking correctly and calculating conversion values. From there, you’ll need to decide on the account structure and targets, start running VBB experiments, and carefully evaluate performance.
Google Ads calculates the budget on a daily basis. To determine the monthly budget, you’ll have to multiply the daily budget by 30.4 (the average number of days in a month). To better manage your spend in GAds, set an average daily budget, view costs from reports, and optimize your spending.
Conversion data makes or breaks your success with bidding to value. To start your campaign on the right foot, set up and track accurate high-touch actions and conversions that align with your business goals.
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