Full-Coverage Conversion Value Modeling
Whether a search campaign is for lead generation or eCommerce, each type of conversion needs to be assigned a value.
Here, we are focused on lead generation campaigns, which include the majority of search campaigns. For example, advertising a service business where leads (sales inquiries) are handled by a sales organization. We have a separate article about this topic for e-commerce search campaigns.
Why assign PPC Conversions a value?
By assigning a conversion value, we are able to measure the two most important metrics for a search campaign: ‘return on ad spend’, and ‘advertising margin’. Even more importantly, we are able to inform the automated bidding system in relative terms how valuable a conversion is. So the automated bidding will be more aggressive in bidding for more valuable conversions.
PPC Conversion Values in e-Commerce campaign
eCommerce campaign conversion value is straightforward: the amount of the sale minus the product cost. So for example if we know the gross margin for a product line, it’s simple to approximate.
PPC Conversion Modeling in Lead Generation Campaigns
This is best explained by example. Suppose a regulatory consulting firm obtains new clients after form fills and phone calls. 60% of incoming client phone calls have resulted in a contract over 2 years. Looking over their financials, they see those calls generated revenue with an average project value of $15,000.
In this case, we would calculate the conversion value of a phone lead as 0.7 * 15,000 = $10,500.
For a Salesforce.com consultancy, the average project might range from $10,000 to $500,000 or even higher from a single phone call. The numbers are impressive but they’re all over the place. Larger values with more variance distribution require a bit more consideration in order to arrive at a meaningful number.
The conversion value doesn’t have to be exact, it will serve it’s purpose if within +/- 25%.
Benefits of creating a conversion model
- First, reporting so we know the campaign profitability metrics.
- Second, to feed conversion metadata (conversion value) back into the automated bidding.
- Third – higher performance campaigns!
Issues with Conversion Value Modeling
eCommerce businesses are the most straightforward in which to establish a conversion value. The majority of search campaigns are lead generation campaigns, so the value of each client acquisition must be made from a sample of project revenue over a longer planning window.