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January 8, 2024

Must-have checklist to get you ready for VBB

Ido Wiesenberg
CEO and Co-Founder

Let’s start from the end. Your marketing budgets can expand. You can suppress your 2024 growth targets. You got this.

Sophisticated growth marketers recognize the AI revolution, from Gen AI ad creatives to Google and Meta's advanced bidding algorithms. They also understand that an acquisition strategy focused on lasting value will help their business get through the winter, and into spring. Which also means growing marketing budgets. Google’s Value-Based Bidding (VBB) is at the forefront of this trend.

But how exactly Value-Based-Bidding is different than traditional campaign goals, like cost per action (CPA)? Why is it a game-changer for growth marketers? What’s the most efficient way to make the switch?

VBB: demystified

Advertisers are reporting a double-digit boost to their ROAS, with the bonus of improved retention, bigger contracts, and more expansion. Notion, a productivity and note-taking service, made the switch to VBB and gained 38% ROAS on their Google ad campaigns without spending another dime.

VBB may drive less volume than conventional conversion-based bidding, but it helps you fish the right customers, those who spend and retain longer so you gain long-term value and exponentially better ROI. 

But, making the transition can be a journey. Eitan Helman, Head of Growth Marketing at Miro recently compared this shift to ascending Mount Everest—an incremental hike, reaching a base camp each time, and progressively accruing more value. This analogy emphasizes that the transition might be a gradual process, underscoring the importance of executing tasks meticulously, establishing appropriate goals for each stage, and closely monitoring relevant parameters.

To assist others in embracing this bidding strategy, we've crafted a tried and true checklist to support you in embarking on this journey. From evaluating data quality to choosing the right bidding strategy for your campaigns, get the must-dos before taking off. It's not just about flipping a switch; it's about setting the stage for a game-changing approach that maximizes your ad budget and fuels real results. 

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The Checklist: Are You Ready for Value-Based Bidding?

Transitioning to a VBB strategy requires careful consideration and preparation. Here are key steps for advertisers to get ready for adopting VBB:

1. Evaluate data quality and availability:

Great data means great outcomes. Assess the quality and availability of your data and make sure that you have accurate and comprehensive conversion tracking in place, capturing both monetary and non-monetary conversions. 

2. Analyze your funnel:

Conduct a funnel deep-dive. Examine the performance of your past campaigns to determine the appropriate values for different funnel steps. Analyze CRM data to identify customer behaviors that are strongly correlated with actual revenue, incorporating those behaviors as conversions.

3. Assess budget flexibility:

Do you have wiggle room to play with your budget allocation? Adaptable budgets are required to respond to shifting market conditions and customer behavior. Evaluate your capacity to dynamically allocate budgets, accommodating bid adjustments based on conversion values.

4. Align with business goals:

VBB works well when your optimization goals align with your high-value business outcomes. Ensure that your optimization goals align with your metrics for key business goals (profitability, CAC, etc.). Configure VBB to reflect the KPIs relevant to your business objectives.

5. Assess tech and prediction capabilities:

We have seen that companies with lengthy customer journeys, diverse pricing or packaging offers, and freemium models often miss down-the-funnel signals that predict high-value conversions. While Google Ads offers robust Smart Bidding options if you want to get that high ROI, you may need to opt for advanced predictive modeling which requires specialized tools or vendor expertise. In cases where value signals are not available early in the funnel, it could be useful to consider value predictions

6. Allow for a learning “Grace Period”:

AI takes time to retrain. Recognize that transitioning to VBB involves the ad network recalibrating to the new goal. Be prepared to allocate sufficient time and scale for the algorithm to learn and fine-tune your bids effectively.

7. Determine the right strategy:

VBB is a powerful approach with distinct advantages under specific circumstances. Consider the following scenarios to pinpoint the right strategy for your campaign:

1) Opt for "Max Conversions" if your primary goal is to maximize conversions for budget (minimize CAC). This strategy is ideal when your priority is to fully utilize the allocated budget and you don't have a specific Return on Investment (ROI) target.
However, this strategy works only when conversion events happen early on, during the first few days of the customer journey. It doesn't work for complex funnels with high-value conversion events that take place after weeks.

2) Choose "Target CPA" if your objective is to maximize conversions while maintaining a maximum CAC. This approach is effective when the conversions being optimized have similar values for your business.

3) Consider "Max Conversion Value" when your focus is on maximizing conversion values for a certain budget. This strategy is suitable if you aim to exhaust the budget while catering to conversion events that hold different values for your business. Lastly, if there's no specific ROI target, "Max Conversion Value" can be the preferred option.

4) Big gains happen when you opt for the tROAS strategy when you have a specific ROI target in mind. This bidding strategy is well-suited for campaigns where conversions vary in value for your business for instance when you have multiple packages or pricing scenarios. 

Each bidding strategy caters to distinct objectives and can be optimized based on the different values of conversions for your business. The flexibility and precision offered by VBB make it an invaluable tool for performance marketers seeking to maximize their campaign's effectiveness while achieving their desired ROI.

The Verdict: Are you ready for VBB?

By thoroughly assessing these factors, advertisers can determine their readiness for VBB and take the necessary steps to begin their transition. We've walked through the crucial checklist - evaluating data quality, analyzing past performance, assessing budget flexibility, aligning with business goals, understanding technological needs, allowing for a learning period, and choosing the right strategy for your campaigns.

The complete guide to Value-Based Bidding

If you are ready to take off and looking for more actionable recommendations and best practices, it could be useful to check out this Complete Guide for Value Based Bidding or watch this joint webinar with Google discussing Value-Based Bidding best practices.  

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