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Why is Full Funnel Bidding a Must-Have?

Why is Full Funnel Bidding a Must-Have?

By   May 7th, 2021

Marketers know the importance of an optimized conversion funnel and its impact on a business’s profit. However, complex conversion funnels with long sales cycles are typical in many industries.
Buying a car, finding the right university or procuring a new piece of software can often take months (and sometimes years) from initial research to completion.

When it comes to paid media optimization for a business with these complex and often lengthy conversion funnels, marketers often face a crucial question: Which stage of the funnel should I use for my bid optimization?
Well, what if you didn’t have to pick and you could factor in multiple stages of a conversion funnel into one bid calculation? This concept is known as full funnel bidding.
This blog will explore full funnel bidding and why it is so important.

Let’s start with the basics: good bid optimization requires useful data, so tracking each stage of the conversion fully is key for funnel optimization.
Sometimes an ad doesn’t lead directly to a sale but instead starts a customer down a path that leads to purchase later on. The aim here is to measure each action (stage of the funnel) a user took in both an online and offline world and then tie it back to advertising spend. Although it can be a challenge, fortunately, there are numerous methods of connecting data from the offline world back to online activity. Connecting CRM actions through a unique identifier, matching order ID data or leveraging dynamic phone numbers are a few methods for measuring offline conversions and/or lifetime value.
This data will help advertisers better understand their conversion funnel to target and optimize their marketing campaigns for increased profit.

 Why Not Just Optimize to the Final Sale?

So once tracking is in place for each stage of our conversion funnel, shouldn’t we optimize our marketing campaigns to our final sale or LTV?
Well, there are several reasons why this might not be the best solution:

Data sparsity – Due to the nature of conversion funnels, downstream conversion events will have fewer data points than upper funnel conversion events. Data sparsity can make it more challenging to optimize your bids.

Data accuracy – For many sales cycles, there are weeks, months or even years between a click on an ad and the final conversion. Latency can lead to situations where you have advertising cost, but you won’t know if it will lead to a conversion.

Reactivity – Advertisers want their bids to stay reactive to market changes. Due to latency, this is not always possible if you are optimizing for your final sale.

So how do we solve these issues? That’s where full funnel bidding comes in.

Full Funnel Optimization – Getting the Best of Both Worlds

Full funnel bidding allows advertisers to use a top-of-the-funnel conversion type for bidding while also factoring in final sales values as a second bid factor. This approach enables advertisers to grow efficiency and revenue from the sales funnel’s final stage while maintaining reactivity to the recent market changes in upper funnel conversion points. Bids stay reactive to market changes, while efficiency targets are based on latent conversion metrics, giving the ability to optimize simultaneously to upper funnel leads and to lower funnel value defined as revenue or customer lifetime value.

Take the below example:

We’re looking at two high-volume keywords with the same number of clicks. 

You can see that keyword one drives a lot more leads than keyword two.  Given it has a higher conversion rate, it makes sense to reward the first keyword with a higher bid.

However, as we moved down the conversion funnel, keyword two, with fewer leads, drove significantly more revenue than keyword one. Keyword two, with better lead quality than keyword one, is boosted with a 2x bid adjustment, while keyword one, the driver of a large number of leads but with low quality, is adjusted downward. This adjustment results in very different bids than were previously calculated, focusing strictly on leads.

Marin Software provides an automated full funnel bidding solution – called Marin Full-Funnel Bidding – as part of our new industry-leading bidding algorithm, and which also works with the publishers’ own bidding solutions. If you would like to find out how this could work for your business, get in contact and one of our account team members will be in touch shortly.