In the world of Google Ads, two popular bidding strategies are “Maximize Conversions” and “Target CPA.” These strategies have evolved over time and are known for their effectiveness. Historically, tCPA (Target Cost Per Acquisition) has been the go-to strategy. Though ROAS campaigns (Return on Ad Spend) are more complex to calculate, they nevertheless offer great potential.

ROAS Campaigns

This article assumes a basic understanding of Google Ads bidding strategies. Terms used will include “Maximize Conversions,” “Target tCPA,” “Maximize Conversion Value,” and “Target ROAS” campaigns. Let’s dive into the essence of ROAS campaigns and how to get the most out of them.

What are ROAS Campaigns and How Do They Work?

Rather than focusing on achieving a conversion at a specific cost per acquisition ROAS campaigns, also known as “Maximize Conversion Value” campaigns, aim to maximize the revenue from conversions. Google does this by considering the value you’ve assigned to each conversion, either dynamically or statically.

Dynamic Values
Dynamic values are commonly used in e-commerce. With a technical integration, you can send the price of each product to Google Ads, allowing Google to bid based on the actual value of the products. Platforms like Shopify simplify the process by automatically providing these values without additional integration.

Static Values
Static values are simpler to implement. These values are set manually by the account manager based on their knowledge of the most profitable products or anything the media buyer considers. This method gives you more control over the strategy. You can decide the values yourself rather than relying on Google to determine them based on actual prices, not profit or custom values.

In both methods, the goal is to provide more data points for Google to optimize the campaign effectively. This approach is particularly powerful for businesses with multiple conversion points. For example as e-commerce sites with numerous products or lead generation funnels with various events.

Hereafter, we will be using the static values method, which gives more control over our data. Now we will learn how we can attribute scores to every conversion.

Lead Scoring: the Key to Mastering ROAS Campaigns

According to Enrique del Valle, “lead scoring consists of giving a different value to each type of conversion that does not have to be economic, we could call it points (score).”

Setting Values with Lead Scoring

Here’s a simple way to assign values based on conversion rates between the different events throughout the funnel:

  1. Identify key events in your funnel (e.g., view product, add to cart, purchase). In our case, our data will be the following:

120 viewed pages     –     14 started payment forms       –      6 purchases

2. Calculate the conversion rates for each event from the first viewed page event.
3. Assign an initial value to the first event. (i.e. 10)
4. Use a formula to calculate the values for subsequent events:

X (next metric’s value) = (initial metric*initial metric’s value) / next metric

Don’t panic. Here’s how the formula looks with the information we have:

Started Payment Form Value = (120*10)/14 = 85.07

This means if we put a viewed page with a value of 10, there have been 120 viewed pages, and out of these, 14 started payment forms have taken place, the value of the started payment form will be around 85. It’s the same process with the actual purchases:

Purchase Value: (120*10)/6 = 200

The value of the purchase here will be 200.

These values will help kick-start your ROAS campaign by providing Google with clear indicators of the importance of each conversion type.

Optimizing ROAS Campaigns: Balancing Values and Targets

It might be tempting to assign high values to all conversions to maximize ROAS. It’s crucial, however, to maintain a balanced relationship between the values and your target ROAS. 

Example Campaign Analysis

Consider two campaigns with the same total spend and conversions, but different conversion values:

RelationCampaignTotal SpendTotal Conv.Conv. 1Value 1Conv. 2Value 2Conv. ValueROASConv.1 CPA
0.62Campaign 1145,00 €1007852285663,901,45 €
0.63Campaign 2145,00 €1007812221913549,341,45 €

The point of this table is to demonstrate that if the relation between the values (in other words, the distance between them) remains the same, the obtained ROAS (in Google’s eyes) in the minor values will be less, and the cost per conversion (CPA) remains the same as well. 

What does this mean? The lower values you set, the lower the target ROAS is expected, and the easier it is for Google Ads to achieve.

Key Takeaways from ROAS Campaigns in Google Ads

    At adnovation, we promote subscription-based products across many countries in the EMEA region and more. Our experience with lifetime user value and user acquisition campaign with challenging CPA goals has led us to several conclusions about maximize conversion value campaigns:

    1. Strict CPA Goals are not ROAS campaign’s best friends: The algorithm for these campaigns involves more variables, making it less precise than tCPA campaigns. This takes to the next takeaway.
    2. If you are scaling accounts, have a go: tCPA campaigns and ROAS campaigns don’t bid for the same auctions, so if you have a stable group of tCPA campaigns, launching a ROAS campaign alongside them will for sure help you scale maintaining your ROI.
    3. Lead Scoring Strategy is Worth the Try: Lead scoring is complex but worthwhile. Here at adnovation we always have some of them running live for the sake of learning how they work. It requires more data points and patience but can be effective for high CPA goals where there’s more room for adjustment.