If you use Google Ads primarily as a growth tool, it stands to reason that you would dedicate your budget in part or in whole to acquiring new customers.
While there are certainly strong use cases to drive repeat business through search advertising, you have other arguably better (and certainly less expensive) ways to engage existing customers once you’ve met their initial demand – like email and SMS marketing.
Whether you’re running lead generation campaigns or ecommerce in Google Ads, the cost of advertising is high enough that it makes sense to focus on those users who haven’t bought from you before.
New Customer Acquisition is a functionality in Performance Max and Search that allows you to exclude users who have done business with you using a customer list. Accurate data is essential if you want to use this setting to ensure good results.
Why New Customer Acquisition Is Important
If you have New Customer Acquisition activated without having a good handle on your data, there’s a good chance that your ROAS is lower than it appears to be.
If you do not properly define existing customers or the value of new customers, this can result in your account overpaying for existing customers, thus distorting ROAS.
Each of the columns in the image above adds context to how your New Customer Acquisition is performing:
- Conversions: The total number of conversions, as defined by the primary conversion action of the campaign
- New customers: How many of the conversions stem from customers who are not present on your customer list
- Conv. value: The total value of all conversions, including any extra conversion value attributed to new customers
- New customer lifetime value: How much of the conversion value is attributed as incremental value from new customers
Two Strategies for New Customer Acquisition Explained
Google Ads does a good job of allowing advertisers who know how to set up ad accounts to do so in a way that makes financial sense of their investment.
One of the ways this shows up is in how New Customer Acquisition offers two approaches to optimize bids for new customers. Both of these approaches are viable with the right data, so choose the one that makes sense for your account’s campaign and business goals.
1. Bidding Exclusively On New Customers
If your sole focus is to reach people who have never done business with you, you can tell Google to only serve your ads to new customers and ignore those who have converted in the past.
In this approach, you only need to define existing customers when you set up audience segments in the campaign. This way, Google knows which customers are existing ones and can therefore focus on others who are searching for what you offer.
2. Bidding Higher On New Customers Than Existing Customers
At other times, you may still wish to show your ad to people who have done business with you in the past – but they may be less valuable and therefore take a lower priority.
For this second approach, in addition to defining existing customers, you must also define a value attributed to the conversion of new customers. This provides a signal to Smart Bidding that this customer type is more valuable, so that it can begin to bid higher on similar signals.
How to Succeed with New Customer Acquisition in Google Ads
If you do not properly define your existing customers and the value of new customers, it can result in overpaying for existing customers and thus distorting ROAS.
Take these steps to prepare your campaign ahead of prospecting for new business:
- Ensure that you can create a detailed audience segment with existing customers. You will need at least 1,000 active customers on the list. Not every business and account will be able to do this, and they should refrain from using Customer Acquisition to avoid overpaying for existing customers and distorting ROAS.
- Assess whether you can assign an additional value to new customers. You can use considerations like buying patterns, fee structures, and other financial details to arrive at a value. Keep in mind, this value is attributed the same regardless of the conversion’s original value, so even a small extra value can significantly enhance your ROAS and Smart Bidding.
- If testing New Customer Acquisition, include the “New customers” and “New customer lifetime value” columns in your campaign overview. This allows you to monitor conversions from new customers and the total additional value attributed to them, letting you better assess the impact on your overall ROAS.
Read more about ecommerce paid search on the SavvyRevenue blog.
