The Benefits of Creating a Conversion Value Model
For every PPC account and display ad campaign, we create a conversion value model for each type of conversion event and select a related method for click attribution modeling. When a conversion occurs, the value for that conversion is distributed, or attributed, up through the sales funnel, with weighting as defined by the click attribution model.
In our conversion value model, what we are after is the gross margin value that each conversion action is producing. In the case of a display campaign that advertises products, the conversion value would likely be calculated as sales price minus sales tax, multiplied by the average gross margin.
For a display campaign advertising a services business, or lead generation campaign, we use a finite planning window, such as one year. We then calculate the average value of a converted customer over that planning window. The formula is: conversion value equals the average value of a converted customer multiplied by the average close rate of leads.
Why Conversion Value Modeling Matters
Conversion value modeling is important because it allows for calculating two of the most important metrics in paid advertising: return on ad spend and advertising margin. More importantly, it provides valuable information back to the automated bidding algorithms, which use machine learning to maximize the performance of the campaign.
This is why conversion value setup should be reviewed as part of broader PPC performance, PPC reporting, and PPC campaign management.
Click Attribution Modeling
For click attribution modeling, we look at the length of the sales conversion process for your market. If there is campaign history in Google Analytics or in the PPC account, we mine that data to fit a click attribution model to the display campaign.
There are articles on this site about the somewhat complex topic of click attribution, a crucial method for driving strong campaign performance, especially for campaigns running with bid automation.
For related campaign strategy topics, see our articles on adaptive optimization, web analytics, and display advertising client results.
A quick overview of the topics covered in this article.
