When tracking conversions in Google Ads, you have the option to associate a value with each of the conversion actions you have in your account. For ecommerce companies, these values are pretty easy to assign. They’re the value of the product that you sold on your website.
But for lead generation companies, it might not be as clear as to what the value should be. Or why you should use values in the first place. Most lead generation companies that we work with only use conversion total and cost per conversion as their main performance metrics. But that’s leaving quite a bit of optimization on the table.
In this article, I want to tell you why you should be using conversion values in your lead generation account on Google Ads. And for those of you who don’t know the value of a lead, I’ll walk you through how to calculate that based on your actual business numbers.
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Who should use conversion values in Google Ads?
If your lead generation company only uses one type of lead and every customer has the same value to you, then this strategy might be a little bit overkill. Target CPA is likely okay for you since you know the regular value of a customer and can calculate an efficient lead cost from that.
But if you’re like most lead generation companies we work with, you likely have one of two things going on that makes you suitable for using conversion values.
First, you may be using multiple types of lead forms on your site. One might ask for only name and email and be for content while another form might ask for lots of identifying information and be for a demo request.
Second, if your products or services have widely differing revenues for your company then each customer (and lead) holds different values for you based on what they select. That’s worth calculating into your marketing efforts. One customer may be worth $500 and another may be worth $10,000 or even $1 million for your company.
If you’re in either one of these buckets or some combination of both, using conversion values in your Google ad account will be a highly valuable tool for you to see the best performance you can from your campaigns.
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Why lead gen companies should use conversion values in Google Ads
In my mind, there are two main reasons why lead generation companies should include conversion values in their Google Ads account whenever possible.
Better transparency into campaign performance
The first is simply for transparency into campaign performance. For ecommerce companies, it’s very easy to log into Google Ads and see which campaigns are not only performing well but which are the most profitable. They’re the ones that are not only making sales but making sales at a cost that is much lower than the revenue associated with that sale.
For lead generation companies, you may have a campaign that’s generating lots of leads at a low cost per lead, but your actual profitability on that campaign is low or even negative because some or none of those leads are turning into customers.
If you’re not generating customers, you’re not generating revenue.
I’ve seen many accounts that generate lots of leads at a low cost, but they’re extremely low quality and never offset their advertising cost because they don’t generate customers. Cost per lead can be a very misleading metric and having values associated with your conversions can help you understand which keywords, ad groups, and campaigns are actually impacting your company’s bottom line for the better rather than simply spending more and generating nothing.
Conversion values can help you better understand which assets within your Google Ads account structure are contributing to your bottom line.
🚨 Pro tip: Get your account structure in order before you add conversion values into the mix using our free, complete guide to the perfect Google Ads account structure!
Better understanding of which campaigns are the most profitable
The second reason is to go one step beyond simply understanding which campaigns are the most profitable and actually leveraging Google’s very smart machine learning to lean further into the campaigns that are more profitable and lean out of those that are less profitable.
More often than not, most lead generation companies use conversion-focused bidding strategies like maximize conversion or target CPA. While there’s nothing wrong with those bidding strategies and they can perform very well for your account, they can sometimes fall into the trap that I just mentioned. Generating lots of leads at a low cost per lead, but that are low quality as well.
When you incorporate conversion values into your Google Ads conversion tracking you can leverage the Google smart bidding algorithm to maximize conversion value and target return on ad spend to not only optimize toward leads but higher quality leads as well.
Let’s take a scenario for a business with multiple calls to action on its site. Let’s say they’re using a contact us form and an ebook content download as CTAs. When someone converts, both of these are leads generated for your business, but they have very different levels of intent.
All the potential actions on this example site could be worth more or less to the business.
The contact us form may be worth 10 times as much as the ebook download because those users are far more likely to turn into a customer over somebody simply wanting to read your content.
In the last section of this post, we’ll talk about how to calculate the value of a given lead type, but for now, it’s important to understand that differing lead types should have different values associated with them so that you can understand the actual profitability of different campaign groups and keywords.
If you’re leveraging smart bidding, Google can optimize to a higher profitability level by generating leads for the ebook at a low cost per lead since the likelihood of a customer is low. For the contact us form, Google has a lot more leniency because that lead action is worth so much more to your company based on the value you assigned it.
In practicality, a single campaign with goals for ebook downloads and contact us forms could be bidding drastically differently from one user to the next depending on which conversion action Google thinks is likely to take place. This is similar to how Google bids more or less aggressively for ecommerce accounts.
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How to add values to conversions in Google Ads
Adding values to your conversion actions in Google Ads is very simple.
First, navigate to the conversion summary page by going to Goal and conversion summary in the left-hand navigation.
If you’re creating a new conversion action, then value will be one of the settings that you can add in the conversion set up process.
If you’re updating the value in an existing conversion action, all you have to do is click on the conversion action name, navigate to the settings tab, click edit, then add in the value you want for that conversion action, and then click save in the bottom right corner.
How to calculate the value of a lead in Google Ads
Now that you know why and how to assign values to your conversion actions in Google Ads, it’s time to talk about what the value should be for each lead. More often than not, the lead generation companies we work with don’t leverage values in their conversion simply because they don’t know what the value of any given lead is.
To get an accurate value per lead there’s going to be some information you need to gather from your business.
Understand the average value of a customer
First, you need to understand a customer’s average value. If you’re a business that sells a product or service that always has the same value associated with each customer, this will be very simple. Just use the amount of revenue you gain every time you get a customer.
For companies that have differing degrees of revenue associated with each customer, this will take a little bit of work. There are a few different methods you could use here:
There’s no real “right” or “wrong” and depending on which finance team you talk to, one method is better than the other. Just pick the one that works best for you. The good news: it doesn’t have to be perfect; it just has to be good enough.
Know your conversion rate across the buyer’s journey
Now that we know how valuable a new customer is to our business, we need to understand the conversion rate through all of the different stages of the buyer’s journey. This includes how many leads become marketing qualified leads (MQLs), how many marketing qualified leads become sales qualified leads (SQLs), how many sales qualified leads become opportunities, and lastly, how many opportunities turn into customers.
All of these will be calculated in the same way that you would calculate a normal conversion rate in your Google Ads account.
The number of conversions divided by the number of clicks gives you your conversion rate.
If we apply this to our first funnel, we would then start at the very top of the funnel and say the number of marketing qualified leads divided by the total number of leads will give us our lead to MQL conversion rate.
We would then replicate this process for each of the different stages of the funnel as you can see in the image below to find the conversion rate for each of those stages.
Here’s how it might look to calculate your conversion rates in each stage of the funnel.
Apply conversion rates to average customer value
Once we know all of the conversion rates for each of the buyer funnel stages, we just need to apply those rates to the average value of a new customer to determine how valuable each stage is for a new customer.
For the first stage, we take the average value for a new customer multiplied by the opportunity-to-customer conversion rate to come up with the average value of an opportunity.
We then replicate that same process by multiplying the average value for a new opportunity times the sales qualified to opportunities conversion rate to come up with the SQL average value.
We do this all the way back up the funnel until we get an average value for a lease. Based on the image above, the value for a lead for this example business is $40. Following the steps in the section above, you would then add the $40 value as the value for our conversion action.
Integrate your CRM data with Google
Depending on how sophisticated your marketing system is, you can also integrate your CRM data with Google app and pass in offline conversion information for marketing qualified leads, sales qualified leads, opportunities, and customers, and apply those associated values with those conversion actions as well.
If you’re able to do that you can then include all of those offline conversions in your conversion column for your campaign and Google Ads will be able to leverage automated bidding to try and maximize revenue or to hit a Target ROAS based on the value associated with all stages of the fire funnel, not just your $40 cost per new lead generated.
At that point, your lead generation campaigns are now operating very similar to ecommerce campaigns. You’re no longer optimizing simply to the first stage of the buyer funnel. You’re optimizing for all stages and working to hit a profitability metric for your lead generation business based on how far somebody gets in the buyer funnel and ideally all the way through to the customer stage.
Better track your lead gen campaigns with conversion values in Google Ads
Leveraging conversion values in Google Ads is a great way to ensure your campaigns are profitable, but lead generation companies have a few more steps to take before they can leverage these strategies. Connect your data points where possible, figure out how valuable a lead is to your business, and start leaning into your profitability today.
Plus, you don’t have to do all this tracking work alone, see how our solutions can help you accurately assign and measure your conversion values for maximized campaign results!
