Google Ad's Target ROAS Bid Strategy, Conversion Volume & Making More Money
There seems to be some misunderstandings about how Target ROAS (Return On Ad Spend) Bid Strategy works and how it can have an impact on conversion volume and ad spend depending on what you set as your Target ROAS.
You want to make as much money from your Google Ad Campaign as possible so you should just set your Target ROAS as high as possible right? Not exactly. The way Target ROAS Bid Strategy works is the higher your set your Target ROAS, the fewer conversions you'll typically get and the lower your spend will be. This is because Google Ads won't show your ads to users it thinks won't generate a high ROAS.
Google Ads will take less risks and therefore will only show your ad for users that have a very high likelihood of converting. In some cases, this can mean the campaign will generate very few impressions/clicks and therefore conversion volume will be lower.
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There seems to be some misunderstandings about how Target ROAS (Return On Ad Spend) Bid Strategy works and how it can have an impact on conversion volume and ad spend depending on what you set as your Target ROAS.
You want to make as much money from your Google Ad Campaign as possible so you should just set your Target ROAS as high as possible right? Not exactly. The way Target ROAS Bid Strategy works is the higher your set your Target ROAS, the fewer conversions you'll typically get and the lower your spend will be. This is because Google Ads won't show your ads to users it thinks won't generate a high ROAS.
Google Ads will take less risks and therefore will only show your ad for users that have a very high likelihood of converting. In some cases, this can mean the campaign will generate very few impressions/clicks and therefore conversion volume will be lower.
What is considered "low conversion volume" is relative and different for every business but this is generally how it works; the higher your Target ROAS is the fewer conversions you'll get. On the flip side, the lower your Target ROAS is, your campaign will generate more clicks and therefore it'll generate more conversions.
How does more conversions not result in higher ROAS? Because you have get more clicks to generate that higher conversion volume, and since you pay per click, this means a lower ROAS, not higher. There may be some exceptions to this but this is how it generally plays out.
If you find that your business needs to see a high ROAS directly from your Google Ad Campaign in order to turn a profit, it could mean that you need to work more on increasing your customer average lifetime value via email marketing. This way you can lower your Target ROAS on the Google Ad Campaign and still remain profitable. Remember it's a lot easier to sell more to your existing customers than it is to get a new customer.
You also may need to work on making your product "at home good" so your business can generate the all so important word of mouth that is so crucial for the long term success of a business. Businesses that have more word of mouth can actually make more money by setting a lower Target ROAS since this will result in more overall conversion volume, which of course means more word of mouth.
As you can see, making more money is not really as simple as just setting a high Target ROAS for your Google Ad Campaign