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Stop Wasting Money on Leads That Won’t Convert: How Conversion Value Bidding Can Transform Your Lead Generation

by | Lead Generation

You’ve been running Google Ads for months and the leads are pouring in, but there’s one big problem. The leads are often low intent. They’re tire kickers or people planning to make a decision months down the road. They’re not necessarily bad leads, but it takes so much time and energy to convert them that you don’t understand why you’re paying Google. It’s a common problem and the solution is often something even experienced campaign managers don’t think to try. 

Many B2B businesses, especially those in the commercial and industrial sector, struggle to generate high-quality leads that actually turn into paying customers. It’s frustrating and you feel like you’re just burning through money. However, you know others in your industry are generating high-quality leads left and right. So, what gives? The problem is often ineffective bidding strategies in your Google Ads campaigns. For many businesses with this problem, we’ve successfully switched conversion value bidding and it’s a game-changer for lead generation. With successful conversion value  bidding, you can finally attract the right kind of leads with Google Ads. 

 

The Problem with Traditional Bidding

Target CPA and Maximize Conversions are two of the more commonly used smart bidding strategies in Google Ads for lead generation companies. On the surface these make sense because their goals are “get me the most conversions for my budget” or “get me the most leads as long as they cost less than my goal.” That’s what every lead gen advertiser wants right? The most conversions you can get while reaching your goals.  However, these bidding strategies have one glaring problem: they treat all conversions equally. But in the B2B world, not all leads are created equal. A lead for a small maintenance job is vastly different from a lead for a large-scale industrial project. Let’s look at a quick example:

  • Lead A: $5,000 potential contract value
  • Lead B: $750 potential contract value

Which lead would you rather pursue? The answer is obvious: Lead A. However, with traditional lead gen bidding strategies, the Google algorithm might optimize for Lead B simply because it’s cheaper to acquire, even if the potential return is significantly lower. This is where conversion value bidding begins to flex it’s muscle. 

 

The Power of Conversion Value Bidding

One of the most significant differences with conversion value bidding is that it allows you to assign different values to different types of conversions. Maximize Conversion Value and Target ROAS bidding strategies allow you to bring conversion value bidding into the algorithm. This tells Google Ads which leads are most valuable to your business, allowing the algorithm to prioritize those higher-value leads. This means you can tell Google that you’d rather focus on capturing on Lead A instead of Lead B in the example above. Now you can focus on ROI and maximize your advertising spend. Now let’s take a look at some additional examples to see how this might play out in a campaign.

 

Real-World Examples

Once you add in conversion values, you give Google additional data for making decisions. Let’s continue the example from above: 

  • Lead A: $5,000 conversion value, $550 Cost Per Acquisition (CPA)
  • Lead B: $750 conversion value, $250 Cost Per Acquisition

Now, you know for your business that Lead A will result in a 909% Return on Ad Spend (ROAS) while Lead B will result in a 300% ROAS. If you were using Target CPA (let’s say your target is $250) or Max Conversion bidding, Google is going to focus on Lead B. It’s the best lead to meet their goals even if it doesn’t meet your business goals.  However, since you know the potential conversion value you can use conversion value bidding. Let’s say you’re using Target ROAS bidding with a target of 500%. Now Google knows that Lead A is more valuable to your business and that you’re ok spending $550 to acquire that lead.  Now, you’re probably thinking something like “ this sounds great, but I don’t have conversion value data for my goals in Google Ads.” Let’s take a look at how to implement conversion value bidding. 

 

Implementing Conversion Value Bidding

Setting up conversion value bidding requires a bit of upfront work, but as we discussed above, the payoff is well worth it. Here’s a step-by-step guide to get you started:

  1. Determine Your Final Conversion Value: This is the ultimate value of a customer or project. If your project values vary significantly, using your average order value (AOV) is a great starting point. For example, if take all your projects over the last 12 months and average them out, let’s say it’s $10,000, that’s your final conversion value.
  2. Map Your Conversion Actions: Identify the key steps in your sales funnel and track them as separate conversion actions in Google Ads. Common examples for B2B service businesses include form fills, phone calls, quote requests, and ultimately, closed deals.
  3. Calculate Conversion Rates: Determine the conversion rate between each step in your funnel. For example, if 100 form fills lead to 30 sales calls, your conversion rate from form fill to sales call is 30%.
  4. Calculate Conversion Values for Each Action: This is where the magic happens. Work backward from your final conversion value, multiplying by the conversion rate at each step.
    • Example: Let’s say an industrial flooring company has an AOV of $10,000. Their sales funnel looks like this:
      • Form Fill –> Quote Request –> Closed Deal
    • Their conversion rates are:
      • Form Fill to Quote Request: 40%
      • Quote Request to Closed Deal: 25%
    • Here’s how they calculate the conversion values:
      • Closed Deal: $10,000 (Final Conversion Value)
      • Quote Request: $10,000 x 25% = $2,500
      • Form Fill: $2,500 x 40% = $1,000
    • Now, in Google Ads, they would assign these values to each conversion action:
      • Form Fill: $1,000
      • Quote Request: $2,500
      • Closed Deal: $10,000
  5. Implement in Google Ads: Once you have your conversion values calculated, you can update your goals in Google Ads. You’ll change the value field in each goal to match the values you calculated above. 
  6. Let The Data Build: Once you’ve added conversion values, don’t immediately change your bidding strategy for a campaign. It’s best to wait and let the data build so Google has historical data to use for bidding. Google recommends waiting 4 weeks or 3 conversion cycles (the length from click to goal completion) before using conversion value bidding strategies.

By following these steps, you can tell Google Ads exactly which leads are most valuable to your business, allowing the algorithm to optimize for maximum return on ad spend.

 

Limitations to Conversion Value Bidding:

So, conversion value bidding probably sounds like the ultimate bidding strategy and that everyone should use it right? Well it does have some limitations to be aware of before jumping into making the change. Let’s take a look at those. 

Requires Sufficient Conversion Data: Conversion Value Bidding needs more conversion data than any other bidding strategy. It relies on accurate conversion data to function effectively. If you have a low conversion volume or inconsistent conversion tracking, the algorithm may not have enough information to optimize your bids effectively. This can result in poor performance or your campaigns won’t even service. In this case, traditional bidding strategies may be more effective.

Can Be Complex to Set Up:  Accurately calculating and assigning conversion values to each step in your sales funnel requires careful planning and analysis. If you’re not comfortable with data analysis or Google Ads settings, you may need to seek assistance from a Google Ads expert.

May Not Be Suitable for All Businesses: Conversion Value Bidding is most effective for businesses with well-defined sales funnels and trackable conversion values. If your business has a complex sales process or if it’s difficult to assign a monetary value to each conversion, this bidding strategy may not be the best fit.

Can Be Less Effective for Brand New Campaigns or Accounts:  If you’re launching a brand new campaign with no historical conversion data, Conversion Value Bidding may not be the best option initially. It’s often recommended to start with Maximize Conversions or Maximize Clicks bidding to gather data and then switch to Conversion Value Bidding once you have enough information.

 

Best Practices and Common Pitfalls:

You’re ready to start using conversion value bidding now, but it’s essential to avoid these common pitfalls:

Not Having Enough Conversion Data: Conversion value bidding needs data to work. If you don’t have enough conversions, the algorithm won’t have enough information to optimize effectively. If you are just starting out, consider starting with other bidding strategies to accumulate the needed data. You might also need to evaluate what conversions you’re tracking. Only switch to conversion value bidding once you have enough conversions per month. We’ve found 30-45 conversions per month is often the ideal place to be for this change. 

Inaccurate Conversion Values: Everyone knows the adage, garbage in, garbage out and it applies here too. The algorithm is going to assume your conversion values are accurate. If they’re not, then you may be paying more for leads than you can afford. Take the time to carefully calculate and assign realistic values to each conversion action. Don’t just make a wild guess!

Ignoring the Sales Funnel: Conversion value bidding works best when you have a clear understanding of your sales funnel and can track each step. If you’re not tracking key actions like form fills or quote requests, you’re missing valuable data that can inform your bidding strategy. Ideally you’ll only be tracking closed deals, but many B2B businesses don’t have enough conversion data to do this effectively. That means tracking goals further down the funnel and you’ll need to understand how that impacts your sales funnel.

Impatience: Like any bidding strategy, conversion value bidding takes time to optimize. Give the algorithm time to learn and adjust before making drastic changes or assuming it’s not going to work. You may find the first month or two performance dips before improving.

Neglecting Regular Monitoring: Set it and forget it is not the approach to take with conversion value bidding. Regularly monitor your campaign performance, analyze your conversion data, and make adjustments as needed. Your business and the market can change, so your bidding strategy should too.

Conclusion:

Conversion value bidding is a game-changer for B2B service businesses that want to maximize their lead generation ROI. By understanding your sales funnel, assigning accurate conversion values, and avoiding common mistakes, you can finally start attracting the high-quality leads that will fuel your business growth. 

Ready to transform your lead generation and stop wasting ad spend? Contact Industrious Marketing today for a free discovery call. We’ll review your current account and identify ways you can start maximizing your return on ad spend.