How Many Conversions You REALLY Need for Google Ads to Work

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Struggling to figure out how much budget you actually need for Google Ads—and how many conversions it takes before Smart Bidding becomes effective? 

In this episode of Google Ads Unleashed, host Jeremy breaks down the real thresholds for Target CPA and Target ROAS, how to reverse-engineer your daily budgets, and why the right conversion event depends on how deep into your funnel you can track. 

You’ll also learn how to use offline conversion tracking, MQL/SQL ratios, and realistic CPA math to finally set goals that Google can optimise toward. 

Get your free 30 minute strategy session with Jeremy here: https://www.younganddigital.marketing/

Scale your store with 1:1 coaching: https://www.younganddigital.marketing/1-2-1-coaching

Transcript

Hello and welcome back to Google ads. Unleash guys. Hope everyone is doing fabulously this Monday. Whoa. What a start. I think it's all the q4 stress, but to take the q4 stress out for you, it is very last minute for you. But if you want to head to the website and go to younger digital dot marketing, you can download my free q4 checklist. You just have to pop in your email address, and you'll be able to download it for free. And to add to the free goodies, I've got a fabulous and exciting announcement, and that is, you can now join our free slack group. We have a completely new Google Ads unleashed slack environment where I'm hoping to create a community of people who are interested in Google Ads e commerce. Founders, lead geners, Google Ads experts, where we just talk and where we share problems and share experiences, talk about the latest episodes. I would love to have you on there, just reach out to Jeremy at young digital dot marketing, or send us an email via the website. You find the contact details there, or send me a message on LinkedIn. It's Jeremy young Google ads. But let's for now, dive into a new topic for this week, and this week's topic was inspired by a call that I had last Thursday, and that was I was talking to another business owner, and he asked me the following question, because it's not an easy question to answer. I've already sort of done this semi in another episode, but I just want to reiterate it again. And he asked me, Jeremy, what is the optimal No, like, sort of, how much do I need to spend in a Google Ads account, and what is the optimal number of conversions I need to actually use target ROAs and target CBA, CPA bidding. And that is not an easy question to answer, so I'll maybe refer first to Google's own documentation, because what is happening is, when you have a brand new account that has no conversion tracking and no history of conversions, it's very, very tricky sometimes to get these off the ground. The reason is, is that the algorithm and the bidding strategies perform best when they have as much data as possible. But of course, when you don't actually have any sort of data, where is it going to come from, right? So it's a bit of a chicken and egg problem. At the beginning, you will have to invest quite a bit of money in order to actually get to the point where you can start having the advantages of advanced bidding, and you will also be, sort of, of course, be in the auction against other people who are using those bid strategies, and maybe already have that data, and who will be outgunning you. So at the beginning, you will always have the challenge that you will have to start with one of two bit strategies, in my opinion, maybe two and a half bid strategies. Okay, if you run a p max, you can just simply smash on max conversions, or max conversion value using E commerce would be max conversion value and just let it rip from the start. Okay, I would probably do that. So that's what I'd count as the half, because no one should be ideally starting with the P max campaign. You can there's many ways to roam, but I wouldn't be doing that. And the second one would be manual CPC. So you would probably sort of have a good idea of what a good CPA target is for your ad account, and then simply set the bids accordingly when you know I need that many clicks in order to get to that CPA target. Let's say, for instance, you have probably a predicted conversion rate of 10% which is extremely high, right? But let's say that's it, and your CPA targets 50 euros or pounds of dollars, then you can probably afford $5 euros, whatever pounds a click. Okay? So you can then start with manual CPC or with maximize clicks, and often add a bid cap. But usually what happens is you can only run those bid strategies for a certain amount of time, because there will be a lot of ad wastage. Your smart bidding does not take into consideration what you so what kind of user searches for the ad, where they come from, if they're likely to purchase whatever, it will just set the bids completely randomly for the look for any auction that may trigger your ad, it's the same for Max clicks. It's the same for for manual CPC. Now, usually that means you will have to let ads run for a certain amount of time in order to generate a certain number of conversions. Okay, so. Google recommends that you should have, within a period of four weeks, at least 30 conversions, so over a period of a month, that is to in order to advance to maximize conversions, or a Target CPA that smart bidding can effectively use, or if you want to use target ROAs or max conversion value, it actually recommends 50 conversions, and that's usually what I go for as well. So that's usually my recommendation, too. And then you can actually reverse engineer what your daily budget should be to start and what your budget could be further down the line in order to effectively use smart bidding and to effectively use sort of Google's budget to your advantage. So let's go back to the scenario that I've just mentioned. Let's say, for instance, you want to be hit in with a 10% conversion rate, and you can afford five euro or stick to euros CPC, you would set the max clicks or the manual CPC may be slightly above that, right, and just eat up the inefficiency for a short while. Now, in order to get 30 conversions for the target CPA, you would, of course, have to spend a minimum of 50 to 60 euros a day in order to get said number of conversions within a month. So that is how you can then actually determine what your daily budget should be and what your spend is probably going to be in that month. Let's say, for instance, you want to spend a Yeah, yeah, you want to make a recommendation to a client. So that would be about 1500 euros a month, all right, in order to generate those number of leads, or it would be the same then for target ROAs. Let's say you need a target ROAs of two, and at the moment, you have a conversion rate of, let's say, 5% okay, so that means every 20th click actually generates you a sale. Then in order to have a target draw as of two, that means you can't have more than for every year you invest, you want to have two euros back. So that means you can't have more of a five cent per click. Is that correct? Sorry if that's if I'm if I'm having a brain fart here, right now to say that, but basically, that's very easy. How you can then calculate what kind of budgets you have to have, right? This is now the basic version, but now let's go down the more complicated route, especially with lead gen. This proves true, right? But it also proves true true with, with, with target ROAs, with with Max conversion value, but with lead gen. I just want to make it a little bit clearer, because the next question that he had, which was very, very intelligent for someone who has never really thought of this that much before, was, okay, Jeremy, I need to spend that much to generate that many leads, but how many of them are marketing qualified? How many of them are sales qualified, and how many of them actually end up being, you know, paying leads, and how the hell do we track that on Google, and how much do we then have to spend in order to actually sort of, first of all generate a certain number of paying customers, okay? And what do we have to do, and how do we track this, right? So how much we have to spend, how much we have to track this? And thirdly, how do we optimize for that? If you've just said 30 conversions a month is sort of the benchmark, I have to say that was an extremely three good question. Extremely good questions, right? So let's go back to the example I just had. Let's say your conversion rates 10% and you need to set a CPC of five euros in order to have a CPA of 50 euros. And that's kind of where you want to get per lead. Now let's say, for instance, your market, your MQL ratio, marketing qualified. Ratio is, for argument's sake, just to make it easy, 50% okay, so that means out of 50 leads, out of sort of 30 leads that you then generate a month, you actually have 15 marketing qualified let's say of them, two thirds are sales qualified. So you're now at 10. And then of them again, 50% actually end up in sales, all right, so out of 50 leads, you have actually a sales ratio of 10% so out of,
sorry, out of 30 leads, you actually have a sales a. Percentage of 1/6 right? So what's that like? 15% or something like that. Now if this car, this client, then said to me, well, first of all, how much do we have to spend then, in order to generate 10 sales a month? Haha, that is very good, right? So there you then have to think, okay, in order to reverse engineer this, I have to now think, if I want 10 sales a month, and I have to sort of for that which, which is double, that means I of course, have to generate 60 leads a month, right? In order to generate 60 leads a month, I will need to spend 3000 right, etc, etc, to I just go back up the ladder in order to reverse engineer that journey, okay, which can then also tell me how much do I spend, then per closed lead, which is 300 pounds or euros, or whatever in this scenario. So, did I get that correct? Yes, once 1/6 so, yeah. So that's basically the first question answered. The second question, how he answered me, or which he asked me, is, then, how do we ensure that with with that we can actually track the people who sign a deal offline? Okay? The answer to that is offline conversion tracking. So for that, there's a I've actually done a separate episode. There's so many ways you can do the skinless cat, right? If you use Salesforce or HubSpot, it's natively integrated. Otherwise, there's a lot of custom solutions that you could build with pipe drive, with with with closed CRM, there's so many things that you can do that. So I've answered that question to him, which he liked, but then he actually asked a really intelligent question. That was so you told me you need about 30 conversions a month in order to effectively optimize towards a goal, if I actually want to have sales right? And now in this scenario, they needed 10 sales a month, right, which we've now reverse engineered, would be 60 leads right with per month. He said, If I need 30 conversions per month, what kind of event should I, if I can track all of these things, and that is MQL, SQL and until closed, what kind of event should I be optimizing towards in order to really get the best and the best type of customer? Because this fear was, if I optimize towards the with the 3000 that I have now per month, and I want to generate 60 leads, right? What that that's twice as many as what is the minimum threshold? And then I'll just optimize towards people who are leads and are not actually people I want to sell my stuff to. Well, I sent us an extremely good question. So usually there's two ways of doing this. First of all, you of course, pick that anyway and try and optimize all the keywords further down that. Well, there's three ways actually, and optimize everything through the data further down the line. The problem is, you're not feeding Google the data. Secondly, you're what you're more than, I'm more than happy to do the following, if everything is set up correctly, is to simply put all of the conversion events on primary and then understand what constitutes a good CPA over time that generates the best outcome for me, as Google learns from lead to MQL to SQL to close deal, that one keyword may trigger several conversions in a row in order to sort of just get the maximum out of that keyword. Or the best thing that you can do is determine how far the funnel Can I go, and at which point do I understand that there's a certain or sufficient number of events that I can optimize towards and set the correct CPA target. So go back to what we said before, the optimal target CPA that you would set over time in order to generate that amount of leads and number of leads, sorry, in MQLs, SQL and actually sales would be 50 euros in this example, which I've now flogged a couple of times. Right which they which, which they want. So if the MQL ratio of that is exactly 50, so is it 50 euros? Yeah, 50 euros. If the MQL ratio of that was 50% right, then we would have 25 then we would have 25 MQLs, which would basically be double the CPA. So need to basically, how should I say leads per MQL, which means that one. Cost us 100 euros. So you would then go down to the event that is closest to what is the minimum number of events that you need per month in order to set a CPA target optimized towards just that as the furthest down the funnel, and then set the CPA target accordingly on platform in order to reach the best CPA goal, and that is how you achieve the optimal bidding. So you optimize towards the event that is lowest, down the funnel, towards the purchase, but at the same time, generates enough events per month in order to be sufficient for smart bidding to kick in. Let's say, for instance, you have a huge account. You spend 50,000 a month, and you have at least 1000 closed deals every, every, every month with that. Well, that's more than enough in order to just exclusively bid for closed deals, and you can set your CPA targets accordingly, then for closed deals, disregarding completely leads, MQLs, SQL, etc, and then just go for the closed deal straight away. Okay, and that is how you would set then the optimal budgets and the optimal CPA targets, and that is how you would track it offline then as well. Okay, so I hope I explained this pretty okay, but this is some mental acrobat. I think I screwed up with the numbers halfway through, but I hope you get what I mean. But basically, what I want you to think about is that if you have a certain goal and a certain thing in mind is to first think of rule number one. What's this with the current conversion rate? What's the what's the CPC I need to set in order to generate at least 30 of those events over a certain number of amount of time? The second thing I want you to think about is, what is the maximum ad spend that I can have that generates an event closest further down the funnel that generates 30 or more conversion events per month that I can then target. And thirdly, what is the actual, real life CPA of that event then in relation to my funnel? Okay, it's quite complex stuff to think about, but that's how you set the optimal bids and the optimal and that is basically the optimal number that you want to work towards. Now, with target Ross, you can do something similar, but you basically take into account customer lifetime value, right? So this is maybe one for another episode, because this wasn't something I particularly discussed with this gentleman, but that was an interesting one, and if you want to discuss that in detail again, just join the WhatsApp group, not Whatsapp group, Slack group, which I've sort of already mentioned at the beginning of this episode. You can simply message me at Jeremy and Google ads on LinkedIn. You can also drop me an email Jeremy at young and digital marketing, and I can have you added to that, and we can have a chat about that case for you. Also, don't forget the q4 down list to download, which is on our website for free, young and digital dot marketing. And of course, new slots have opened in the new year for more positions in the agency. You can become a client of ours if you want to work with us, simply just reach me via set channels as well. This has been Jeremy young, your personal Google Ads expert. I wish you a happy and productive week ahead.