For those who focus on conversions in their paid search strategy, maximizing the profitability of their advertising efforts is a top priority. Google offers several Smart Bidding strategies that can get you more conversions at the cost you see fit. However, if you want to take this strategy to the next level and focus solely on driving positive ROI, you may want to consider target ROAS (tROAS) bidding. This automated bidding strategy isn’t a one-size-fits-all solution for every advertiser to make money on Google Ads, but, for many, it can make a huge difference. In this article, I’ll dive into:
- What is Target ROAS?
- who should use it
- How to set up your tROAS
I’ll also share tips throughout to get the most out of your budget. Let’s start.
What is Target ROAS?
Target ROAS or “tROAS” stands for “target return on ad spend” and falls under Google’s Smart Bidding strategy category.these are automated bidding strategy Use “bid at auction” – this means Google will optimize for conversions or conversion value in every auction you enter.
What is ROAS?
return on ad spend Measure the amount of revenue your business earns for every dollar spent on advertising. This is ROI, and investment is how much you spend on advertising – in this case Google Ads. You can measure ROAS at the account, campaign, ad group and ad levels in Google Ads. In the case of bid strategies, these are set at the portfolio, campaign or ad group level.
Path to target ROAS
To really understand tROAS, you need to understand its relatives on the bidding strategy evolutionary tree.
max conversions
Maximize conversions or “max conversions” is an automated bidding strategy designed to get you as many conversions as possible within your daily budget.This automatic setup has many advantages and disadvantages that I won’t go into too much in this post – you can find The pros and cons of each automated bidding strategy here) – but I will say so Regardless of conversion quality When using this bidding strategy, Google bids aggressively for you to drive as many conversions as possible. It is essentially a stripped-down version of the next two strategies.
Target CPA
Target CPA stands for Target Cost Per Action and is the next level in the evolution of conversion-centric automated bidding.This is an additional option in Max Conversions that allows you to specify a desired target cost per action (also known as cost per acquisition (different from customer acquisition cost). Google adjusts bids to meet average cost per conversion the number you specify.
Maximum Conversion Value
This bid strategy works much like a maximum conversion strategy, but instead of optimizing for conversions volumeit looks to maximize conversion value. In order to use this strategy (and tROAS for that matter), you must specify conversion value for the action you want to perform.
This means that if you drive simply Lead Form Submission You won’t use any of these bid strategies if there isn’t any immediate value associated with them.
target ROAS
The target ROAS is under the Max Conversion Value option:
Google Ads predicts future conversions and associated value (using your Conversion tracking grade). Google will then set a maximum CPC bid to maximize your conversion value while trying to achieve an average return on ad spend equal to the goal you specified.
What is the difference between tCPA and tROAS?
The two bid strategies work very similarly, but The main difference between Target CPA and Target ROAS is that Target CPA adjusts your bids to meet a predefined cost-per-acquisition target, while Target ROAS adjusts your bids to maximize the value of those conversions.
When to use a target ROAS bid strategy
In order to use tROAS correctly, you must assign a value to the conversion action. Due to the nature of the name “return on ad spend,” these conversion values should reflect the revenue you generate from users converting on your ads.
- Do not use tROAS when: Your Google Ads conversions do not generate a direct ROI (ie eBook downloads or free tools).
- Use tROAS if: Your Google Ads conversions do have a direct ROI (i.e. online sales).
Let’s see if tROAS is right for your business with some examples:
scene 1: The business you run or work for requires Drive qualified leads to the sales team. In addition to some ebook downloads, your conversion actions include signing up for a sales demo.
In this case, you’re better off using Max Conversions or Target CPA bidding. Direct leads to sales team, no matter how qualified, there is always a loop that is not immediate. Sales reps need time to contact prospects over the phone, who then complete the buying process.
Now, if you really want to, you can Connect Salesforce to Google Ads In this case you will be able to take advantage of tROAS. However, you need to be very proficient in Salesforce or have someone to work with to get it set up properly.
Scenario #2: you run a e-commerce store Allow users to buy or order directly from your website. In this case, tROAS is recommended because your conversions have direct value associated with them. Whether you offer one or more products at different prices, tROAS allows you to optimize each activity to generate the desired return on investment.
How to set tROAS
if you are a business selling online Or to see a direct ROI for conversion actions, you have several setup options before running a tROAS bid strategy on your campaign.How you decide to set the conversion value will be decided later How you structure your campaigns to optimize ROAS.
Set conversion value
You can assign conversion values to existing or newly created conversion actions in your Google Ads account. In the upper right corner of the Google Ads dashboard, select the Tools & Settings icon, then select Conversions under Measurements:
There, create a new transition or select the transition you want to edit. In your conversion settings, there will be a section labeled “Value”:
You’ll then have two options for assigning value to your conversions:
- Use the same value for every conversion: This assigns a fixed value to a lead or purchase. For example, if you only sell one product, enter the value of each sale.
- Use a different value for each conversion: If you sell multiple products at different prices, you can assign a unique value to each conversion. You (or a web developer) need to edit the Google markup on your site for it to work.For more information on this go to Google help article on conversion value for a specific deal.
What should I set the target ROAS to?
When choosing tROAS as your bid strategy, you’ll notice that you have to specify the return percentage you want your campaign to target:
When determining this percentage, consider the following factors:
- The conversion value you are optimizing for
- ROAS = (Revenue/Ad spend) X 100
- ROAS doesn’t take into account everything ROI does
For example, if you spend $50 to generate $100 in revenue, the ROAS for that campaign will be 200%. But while this looks good, it doesn’t take into account everything involved in your business side. That’s why plan your target ROAS to maximize the profitability of your business and its goals.
Final Tips for tROAS
On a platform as complex as Google Ads, choosing the right bidding strategy for your campaign is one of the many important decisions marketers must make.
Google’s Smart Bidding has proven to be an effective way to optimize your Search, Display, and Shopping campaigns. Aside from smart campaign planning and structure, the most important factor in efficient Smart Bidding is how much data Google receives to properly optimize for you.
Getting the right trace right is half the battle when it comes to running a successful tROAS campaign. You will need to make the necessary adjustments at the ad group level and make data-driven decisions based on the percentage of ROAS you are trying to achieve. Google Ads is a marathon, not a race, so keep that in mind if your efforts don’t seem to be working on the first try.
