Google Ads: Maximise Conversion Value Bidding Strategy – Are You Looking at the Right Numbers?

If you've been running ads on Google for a while, you’ve likely come across bidding strategy options. Whether you’re setting up a new campaign or adjusting an existing one, Google prompts you to choose a bidding strategy. In this article, I’ll delve deeper into a specific bidding strategy: Maximise Conversion Value, which focuses on Return on Ad Spend (ROAS).

I’ll explain what ROAS is, what it aims to achieve, when it’s beneficial, and situations where it may not be the best choice.

What is Return on Ad Spend (ROAS)?

ROAS stands for Return on Ad Spend, meaning it measures how much revenue you generate for every pound spent on advertising. It is typically represented as a number or a percentage. For example, if your ROAS is 300%, it means you’re generating £3 for every £1 spent on ads.

Let’s break this down with an example:

Imagine you are a landscape gardener in Exeter, Devon, targeting keywords like “Exeter landscape gardening services.” Let’s assume:

• Every lead (a phone call or form submission) has a 50% chance of converting into a paying customer.
• The initial average value of a sale is £500, but this only represents the first sale. Many businesses make the mistake of stopping here. The reality is, if a customer comes back for additional services over time, their lifetime value (LTV) may be much higher.
• If, on average, a returning customer brings in an additional £1,500 in revenue over a few years, the true average value of a customer isn’t £500—it’s £2,000.
• Each lead is therefore worth £1,000 (since 50% of leads convert and lifetime value is considered).
• Your average cost per click is £4.
• Your conversion rate (percentage of clicks that turn into leads) is 5%.

With these numbers, we can estimate your ROAS and determine whether it’s a profitable strategy.

1. Calculate the Cost per Lead (CPL):
   • CPL = Cost per Click / Conversion Rate
   • £4 / 0.05 = £80 per lead
2. Calculate the Revenue per Lead:
   • Revenue per Lead = Average Lifetime Value × Lead Conversion Rate
   • £2,000 × 0.5 = £1,000 per lead
3. Calculate ROAS:
   • ROAS = Revenue per Lead / CPL
   • £1,000 / £80 = 12.5 (or 1,250%)

This means for every £1 spent on ads, you generate £12.50 in return - a ROAS of 1,250%.

Failing to consider lifetime value can lead advertisers to make short-sighted decisions. If you only factor in the first sale, you might prematurely pause or cut ad spend, thinking it’s not profitable - when in reality, long-term revenue is being missed.

How to Use ROAS as a Bidding Strategy

Think of ROAS like managing a restaurant’s ingredient costs. If you own a restaurant, you wouldn’t just buy expensive ingredients and hope for the best - you’d calculate the cost per dish and ensure it’s profitable. Similarly, in Google Ads, you need to track conversions and assign accurate values to leads and sales to determine whether your ad spend is delivering a positive return.

If you want to implement a ROAS bidding strategy, you need to have the right tracking in place. This means:

1. Tracking meaningful conversions – Ensure you’re tracking sales, phone calls, or form submissions that generate real revenue.
2. Assigning a value to conversions – For e-commerce, Google Ads can track actual purchase values. For service-based businesses, you may need to assign estimated values based on historical data, including lifetime value, not just first-sale value.
3. Understanding different conversion types – For example, a phone call may convert at a higher rate than a form submission, making it more valuable.

If you don’t have proper tracking, ROAS bidding will be ineffective.

How ROAS Bidding Works in Google Ads

Imagine Google Ads is like a self-driving car. When you set a ROAS target, you’re telling Google how aggressively to drive toward profitable conversions. However, the car needs time to learn the road - if you constantly change the destination (adjusting ROAS targets or budgets), the car has to keep recalibrating, making the journey inefficient.

When you switch to a ROAS bidding strategy, Google needs time to learn. You won’t see immediate results. Typically:

• Google may take a few days to a few weeks to optimise performance.
• The system will indicate when your campaign is in the learning phase.
• Any major changes (e.g., budget increases or target ROAS adjustments) will restart the learning phase.

For example, if you set a 300% ROAS target, Google will optimise bids to achieve that return. However, if you increase it to 600% too quickly, Google may struggle to find enough high-value conversions, limiting your ad visibility.

Using Experiments to Test ROAS Bidding

Think of Google Ads experiments like taste testing a new recipe before adding it to your restaurant’s menu. Instead of changing everything at once, you prepare two versions of the dish and see which one customers prefer. Similarly, with Google Ads, you can run an experiment to test different ROAS targets before committing to major changes.

To determine if ROAS is right for your business, consider running a Google Ads experiment:

• Duplicate your existing campaign.
• Keep the control campaign at 300% ROAS.
• Set the experiment campaign to 600% ROAS.
• Monitor visibility, conversions, and overall impact.

Experiments help ensure you make data-driven decisions rather than switching strategies abruptly.

Final Thoughts

ROAS is a valuable bidding strategy when used correctly, but it requires:

✅ Proper conversion tracking and value assignments.
✅ Understanding that higher ROAS targets may reduce reach.
✅ Factoring in lifetime value, not just the first sale.
✅ Allowing Google Ads time to learn and optimise.
✅ Testing before making drastic changes.

If you’re still unsure about ROAS or need help setting up Google Ads experiments, I offer two options:

• Full Google Ads Management – I handle everything for you.
• Google Ads Power Hour – A one-on-one recorded session to help you optimise your strategy.

If either sounds like a good fit, get in touch to book a discovery call!