Conversion Value: What It Means & Why It’s Crucial to Your Business
In digital marketing, the general term “conversion” can mean a variety of things depending on who you’re talking to and what you’re talking about. This is particularly true within Google Ads—you can track countless actions that visitors take on your site.
When you have multiple layers of a marketing funnel, every conversion just isn’t created equally. Some conversions don’t matter as much to your business goals, while others are of higher value (literally, for ecommerce businesses) and should be reported and optimized for accordingly. But how can you do that? Two words: conversion value.
In this guide to conversion value, we’ll cover:
- What a conversion value is.
- How to use conversion values to improve your marketing strategy.
- How to optimize your account with conversion values.
- Why conversion value is important.
What is a conversion value?
A conversion value is a numerical value that you assign to specific conversions in order to represent their impact to your business.
The major benefit to assigning conversion values is to help you track, optimize, and report on your return on ad spend (ROAS). Once your conversion values are set up, you can use the target return on ad spend (ROAS) bid strategy in your campaigns to maximize your conversions. Another benefit to setting conversion values is to help you make more informed decisions within your account. The extra layer of visibility allows you to identify keywords, ad groups, and campaigns that show either a high or low return on investment. This gives you the clarity to optimize and make decisions based on real ROI data, not just homogenous conversion volume and costs.
How to create conversion values
There are two ways that you can set up conversion values, and these depend on the step you’re doing the creating:
- When you are setting up a conversion action.
- When you have a conversion action set up and wish to attribute a value to it.
If you are in the process of creating a conversion, there is a section labeled “Value.”
Here, you can attribute a uniform value for the specific conversion “static values” or different values to reflect transaction-specific "dynamic" values. You would use the static option if all of this conversion that you are creating hold the same value. You would use the dynamic option if each transaction holds a different value. It’s important to note that if you conduct business outside of the country you are located in, conversion values will always be displayed in your Google Ads billing currency. However, you can assign a different currency to the value of each conversion.
Static conversion value: To set up a static conversion value, you simply select “Use the same value for each conversion.”
This is pretty straightforward: For every time this conversion fires as a result from your ads, the conversion value that you put in place will show. The more conversions, the more revenue—and then you can subtract the ad spend and get an idea of what your ROI is.
Dynamic conversion value: This one is a bit more complicated, but it's pretty cool once you get it set up. What you’ll want to do is select “Use different values for each conversion” and enter a default value.
Next, you’ll want to add or modify the tag in your website’s code. It critical to make sure that the page where you put the code snippet is the one your customers see after a conversion takes place.
Google explains this process as such:
Essentially, you’re passing the transaction information through to the conversion. This will relay that information back to Google Ads, and you will have your dynamically generated ROAS. Unfortunately, if you aren’t familiar with editing code, you may need the help of a web developer to ensure this is properly done. For more information, check out Google’s explanation.
If you have a conversion that already exists and want to add a value to it, go to “Tools & Settings” and select “Conversions.”
Once there, select your desired conversion from the list and then click “Edit Settings.”
From there, you can attribute a value the same way as mentioned above:
How to optimize your campaigns for conversion value
After setting up your conversion values (either static or dynamic), you’ll have the option to automatically automate your bid strategy towards return on ad spend. Setting up your bid strategies to focus on ROAS is a way to further ensure that your goals are met. You simply select the campaign via the checkbox on the left and then select “Edit.”
Then you’ll want to select “Change bid strategy.”
Here, you’ll then have the option to select “Target ROAS.”
When to use conversion values
Using monetary conversion values depends upon the nature of your sales process as well as your marketing strategy on Google. If you’re marketing ebooks or simple lead generation form submissions, it may not be possible to attribute a value to the conversion. Unless you have a very sophisticated marketing operations back-end and you know the average prospect-to-customer conversion rate, attributing a value to these leads can be rather difficult. However, if the ads you are running drive directly to sales or a purchase, I highly recommend attributing values to them.
If you operate an online store, for example, a conversion from a shopping cart may equate to $25 or $500. In this scenario you would absolutely want to go through the extra effort to establish dynamic conversion values that are transaction specific. If each conversion has a varying degree of value, it’s absolutely necessary to establish dynamic conversion values in order to properly optimize your account.
Here’s an example to better explain. Let’s say you have a couple keywords in the account that are tracked by a generic value-less conversion. When optimizing, one may appear like it is driving more business:
Keyword 1: 25 conversions
Keyword 2: 5 conversions
However, without conversion values you don’t necessarily know what the ROI is from each keyword individually. It’s entirely possible that the 25 conversions have a value of $10 each totaling $250 in ROAS, whereas the five conversions total around $100 dollars each for $500 total. Without conversion values to relay this information, you would most likely allocate more budget to the keyword with higher volume. Setting dynamic conversion values can help here.
Now, there are several layers of information beyond this, including cost per conversion. But having the conversion values accurately recorded will lift the veil and change the way you approach your entire account.
An example for using static conversion values would be if you are driving to landing pages for specific products where the price isn’t going to change (i.e., there’s no shopping cart). In that scenario, you would want to create static value conversions for each product or promotion that you plan on marketing via search or display. You would then optimize each product or promotions based on its individual ROAS. You may find that some generate more revenue for your business than others and, in that case, you can double down on the winners.
As mentioned above, it may be difficult to create conversion values if your promotion does not directly generate revenue. This can include anything from a free trial promotion to a sales demo. Luckily, Google provides you the option to assign value to non-monetary conversions. These values are referred to as key performance indicators, or KPIs. This allows you to assign numerical values to each conversion type. The lower funnel the conversion, the higher you can set the numerical value. To set KPIs, you would select “no currency value” when choosing the currency type for your conversion value:
Optimizing for conversion value helps your account succeed where it matters most
For many businesses, conversion values are the difference between generating a profit from Google Ads or taking a loss. Creating these values and optimizing for what is truly important (i.e., you making more money than you’re spending) completely changes the way that your account is managed.
Although it may be difficult to implement the dynamic conversion values, I would say that it is more than worth the effort. If you are running ads that don’t drive to a direct monetary outcome, assigning non-monetary conversion values may be helpful in understanding the general profit potential of your account. Regardless of your objective, it is important to understand that not all conversions are created equal and your reporting, strategy, and optimizations should reflect that.