Purchase / Conversion Value

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Term Definition
Purchase / Conversion Value

The value of the product or service that has been sold

In digital marketing, Purchase / Conversion Value refers to two related but distinct concepts:

1. Purchase Value:

  • This represents the actual revenue generated from a specific purchase conversion. It's typically assigned to transactions made on your website or app.
  • For example, if someone purchases a shirt for $20, the purchase value for that conversion would be $20.
  • Understanding purchase value allows you to:
    • Calculate return on ad spend (ROAS): Measure the effectiveness of your marketing campaigns by dividing the total revenue generated by the total ad spend.
    • Optimize campaigns for profitability: Focus on driving high-value conversions that bring in the most revenue.
    • Set bidding strategies: Inform bidding algorithms in platforms like Google Ads to prioritize more valuable conversions during auctions.

2. Conversion Value:

  • This is a broader term, encompassing the financial value assigned to any desired action considered a conversion. It's not limited to purchases and can include lead generation, app downloads, newsletter signups, etc.
  • The assigned value may be based on different factors:
    • Direct revenue: E.g., $10 for a lead that is likely to convert into a sale.
    • Estimated future revenue: E.g., $50 for an app download that has a high lifetime value.
    • Cost of acquisition: E.g., $2 for a newsletter signup that costs less to convert into a customer.
  • Tracking conversion value provides valuable insights into:
    • Overall campaign performance: Go beyond just conversion numbers and understand the true revenue impact.
    • Identifying high-value segments: Analyze which conversions contribute the most to your bottom line.
    • Prioritizing optimization efforts: Focus on improving the performance of actions with the highest value.

It's important to distinguish between these two terms:

  • Purchase value is a specific type of conversion value for purchases.
  • Conversion value can encompass any desired action with an assigned financial value, including purchases.

By understanding both Purchase and Conversion Value, you can gain a deeper understanding of your marketing results and make more informed decisions to optimize your campaigns for maximum profitability.

Synonyms: PCV