Beyond Conversions: Setting Up Value-Based Bidding for Long Term Customer Profitability

Beyond Conversions: Setting Up Value-Based Bidding for Long Term Customer Profitability

You’re getting conversions. Your Google Ads campaigns are performing. But here’s the problem: not all conversions are worth the same to your business.

A customer who spends £50 once shouldn’t cost the same to acquire as one who spends £500 repeatedly over three years. Yet most PPC campaigns treat them identically, chasing conversion volume rather than actual business value.

Value based bidding changes this. Instead of quantity, it focuses ad spend on customers who genuinely drive profit. This guide shows you how to set it up and why it matters for your bottom line.

What Is Value-Based Bidding?

Value-based bidding is a Google Ads strategy that optimises campaigns based on the actual worth of each conversion, not just that a conversion happened.

Traditional conversion tracking treats every lead or sale equally. Someone downloading a free guide gets the same algorithmic weight as someone requesting a £10,000 service quote. Value-based bidding assigns different values to different conversion actions, letting Google’s algorithms prioritise the conversions that matter most.

The Key Difference

Traditional bidding: “Get me as many conversions as possible for £100 per day”

Value-based bidding: “Get me the highest total conversion value for £100 per day”

The distinction seems subtle, but the impact is significant. Value-based bidding pushes campaigns towards high value customers rather than simply increasing conversion volume.

Why You Should Make the Switch

Not All Customers Are Equal

E-commerce businesses know some customers buy once and disappear whilst others become loyal repeat purchasers. Service businesses see the same pattern – some enquiries turn into long term clients worth thousands, others never convert.

Value-based bidding helps you attract more of the former and fewer of the latter.

Better Return on Ad Spend

When Google’s algorithms understand which conversions generate the most revenue, they bid more aggressively for valuable prospects and ease off on low value ones. This typically improves overall return on ad spend by 20-30% once the system learns your value patterns.

Smarter Budget Allocation

During peak periods like Black Friday or January sales, value-based bidding automatically shifts budget towards your highest value products or services rather than spreading it evenly across all conversions.

Setting Up Value Based Bidding: Five Practical Steps

Step 1: Determine Your Conversion Values

Before implementing value-based bidding, you need to know what different conversions are worth.

For e-commerce:

• Use actual transaction values (straightforward – a £200 order is worth £200)
• Consider lifetime value if you have strong repeat purchase data
• Factor in profit margins for more accurate optimisation

For lead generation:

• Calculate average customer value from existing data
• Segment by lead quality (high intent versus information-gathering)
• Assign conservative values initially, then refine based on results

Step 2: Implement Conversion Value Tracking

You’ll need to pass conversion values to Google Ads. Three main approaches exist:

Dynamic values: Best for e-commerce. Google Ads automatically receives the transaction value from your website.

Static values: Assign fixed values to different conversion actions (e.g., all quote requests = £500).

Rule-based values: Use Google Tag Manager to assign different values based on specific conditions (e.g., different values for different product categories).

Most businesses start with static values and progress to more sophisticated tracking as they gather data.

Step 3: Accumulate Conversion Data

Google’s algorithms need data to learn. Before switching to value-based bidding strategies, ensure you have at least 30 conversions in the past 30 days (ideally 50+ conversions for better performance).

Without sufficient conversion volume, stick with standard conversion tracking until you reach these thresholds.

Step 4: Choose Your Value-Based Bid Strategy

Once conversion values are tracking correctly and you have sufficient data, transition to a value-based bidding strategy:

Maximise Conversion Value: Gets the highest total conversion value within your budget. Good for businesses with flexible budgets focused on growth.

Target ROAS (Return on Ad Spend): Sets bids to achieve a specific return on ad spend. Best for businesses with clear profitability targets (e.g., target 400% ROAS means £4 revenue for every £1 spent).

Start conservatively. If you’ve been getting 500% ROAS historically, don’t immediately set a 600% target – algorithms need time to adjust.

Step 5: Monitor and Refine

Value-based bidding isn’t “set and forget.” Regular monitoring helps you catch issues early and optimise performance.

Check weekly:

• Total conversion value trends
• ROAS performance
• High-value conversion patterns
• Budget pacing

Review monthly:

• Whether assigned values match actual customer profitability
• Performance by campaign and ad group
• Opportunities to refine value assignments

Common Mistakes to Avoid

Overvaluing low-intent conversions: That newsletter signup isn’t worth £50 just because you hope it leads to a sale. Be realistic with value assignments.

Switching too quickly: Give algorithms 4-6 weeks to learn before making major strategy changes. Value-based bidding takes longer to stabilise than standard conversion tracking.

Ignoring profit margins: Revenue isn’t the same as profit. A £1,000 sale with 10% margin (£100 profit) is less valuable than a £600 sale with 40% margin (£240 profit).

Not segmenting by customer type: New customers and returning customers often have different values. Consider tracking them separately for more precise optimisation.

Measuring Success

Value-based bidding success looks different from traditional conversion tracking. Focus on these metrics:

• Total conversion value: Is the total value of conversions increasing?
• ROAS: Are you achieving your target return on ad spend?
• Average order value: Are you attracting higher-value transactions?
• Customer lifetime value: Over time, are your customers becoming more valuable?

Don’t panic if conversion volume drops slightly – that’s often a sign the system is correctly filtering out low value conversions.

Is Value-Based Bidding Right for Your Business?

Value-based bidding works best for:

• E-commerce businesses with varying product values
• Service businesses with high customer lifetime values
• B2B companies where lead quality varies significantly
• Any business with sufficient conversion volume (30+ monthly conversions)

It’s less suitable for businesses with:

• Very low conversion volumes
• Identical value for all conversions
• New campaigns still gathering initial data

Ready to Focus on Profitable Customers?

Transitioning to value-based bidding represents a fundamental shift in how you approach PPC. Instead of celebrating every conversion equally, you’re teaching Google which customers matter to your bottom line.

The setup requires effort – calculating values, implementing tracking, and monitoring performance – but the payoff is campaigns that generate genuine profit rather than vanity metrics.

Ready to move beyond basic conversions? Get in touch today to discuss how value-based bidding can improve your PPC profitability.