AdWords: Why use Conversion Values?

By Phil Smulian | Google AdWords

Feb 15
Dollar sign drawn onto a piece of paper

What this post covers

  • What are conversion values?
  • How do I use them?
  • How do they work with Google Ads?
  • Reporting on revenue

What are conversion values, and why do they matter anyway?

What do we mean by a conversion?

A conversion will be whatever action, that is taken by a visitor, that can be translated into revenue for your business. You might say that a website sale is a direct conversion, whereas an info request has indirect impact on your revenue numbers. Either way, these usually include when visitors call you from your website or Google properties, or when they submit a form requesting a quote, a call back or more info.

What is a conversion value?

In Google terms, this means a monetary figure that you can attach to a website action. For example, when someone checks out from your shopping cart, the total amount of that single transaction would represent the exact value of that sale, regardless of how many products were sold. Another example might be when someone calls the business, and is considered a lead. While there’s no direct revenue figure you can attach to this, you might derive its ‘value’ in other ways, which we suggest further down.

What types of conversion values are available?

Any conversion in Google Ads can be assigned a user-defined money value. Similarly, any Goal in Google Analytics can be manually assigned a monetary figure. E-commerce transaction values are generated automatically and will depend on actual transactions that occur on your website.

What are the sources of conversion values?

Conversion values can be set within Google Ads, or within Google Analytics, and can be imported from Analytics to Ads. E-commerce transaction values, which are different thing, are not set by you, but are generated by your website. E-commerce transactions are configured within Google Analytics, and can be imported into Google Ads, to then be used to inform your campaigns and help you optimise your budget spending accordingly.

How do I set up & use conversion values?

Deciding on conversion values

If you are able to set up transaction tracking on your website, and your one and only meaningful type of revenue goal, or conversion is to make sales, then you don’t have to decide.

If however, you wish to factor leads into your revenue, then you’ll need to do a little bit of maths. It’s not always so easy to keep track of every lead that passes through your website, in which case you can use average values. So, the logic for deriving an average sale value might look something like this:

In 1 month we made $100,000. During that month, we made 100 sales. Already we have an average value of a single sale for that month, which is $100,000 divided by 100, which is $1,000 per sale.

If we want to make this more insightful, we can break it down:

During the same month, our total number of leads was 500, of which, phone calls received were 125, while we were sent 250 quote requests, and 125 general enquiries.

Given this info, we can estimate average values for each type of conversion:

  • Phone calls = 25% = 25 sales = $25,000 revenue
  • Quote Requests = 50% = 50 sales = $50,000 revenue
  • General Enquiries = 25% = 25 sales = $25,000 revenue

If you happen to know that sales from phone calls specifically amounted to a different number than above, you can then divide that number by the number of phone calls received, and adjust you average value per phone-call sale, accordingly.

The idea is that you get your average conversion values as close to your actual revenue as is practical to do.

How do I set up conversion values?

In Google Ads, when you’re setting up a new conversion action, or editing an existing one, you can set a value for that conversion action.

In Google Analytics, when setting up any Goal, you can choose to type in a value manually, or you can tell Analytics to use the value that comes from the event that triggered the goal (a slightly more complicated but useful method).

E-commerce tracking is rather more complicated to set up, and will likely require you to ask your developer to actually modify the code on your website, and get assistance from your digital marketing provider to help with the Google tools. In a nutshell, E-commerce tracking collects actual live sales data as it happens on your website, and attributes the revenue directly to the various campaigns and traffic sources that are available in Analytics. The E-commerce figures can also be imported into Google Ads.

How does this impact Google Ads campaigns?

Once Google Ads can attribute actual sales values against keywords, ad groups, ads, and landing pages, then it can inform your PPC manager on how to adjust bids, or can directly tell Google Ads Smart-Bidding strategies how much a lead is ‘worth’, so the algorithm can decide how much to bid in the moment, so that you’re likely to maximise your value earned, or your revenue. The specific Smart bidding strategy that you can make use of when you have conversion values inplay is the Target Return on Ad Spend strategy, which helps you set a specific target amount of return you’d like to make on what you’re spending on your ads.

Conclusion

You want to use conversion values in your tracking because it will provide a feedback loop to inform your bidding strategies, and dynamically optimise what you are spending. You can make your ad campaigns, to some degree self-moderating, and focused on increasing revenue, and profitability, which is what any business should really be trying to do.

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