Red Flag #11

They optimise to the cheapest cost per conversion, ignoring which products actually matter

You tell your agency that Product A is the strategic focus this year. It’s the higher-margin line. It’s the one sales is staffed to support. It’s the one your CEO told the board about. Three months later, the report shows that Product B and Product C are getting the lion’s share of the spend — because they happen to convert at a lower cost per lead. The agency presents this as performance. It is, in fact, an abdication.

Cost per conversion (or cost per lead, or cost per acquisition — same idea, slightly different metrics) is a useful number, but it is one input into a real budgeting decision, not the entire decision. A $400 lead for a $40,000 product is a wildly better outcome than a $90 lead for a $4,000 product, even though the per-lead number favors the second. An agency that optimises to lowest cost per conversion in the absence of revenue or margin signal is not running your strategy. They are running Google’s default heuristic, and your strategic priorities are silently losing the budget allocation argument every week.

Why agencies do it

It’s the easiest target to hit and the easiest to defend.

Cost per conversion is countable and immediate. It shows up in the platform within days. It is the number Google’s automated bidding strategies are designed to minimise out of the box. The agency can hit it without conversation, without context, without understanding what your business actually values. As long as the per-lead number trends down, the report looks good.

The strategic alternative — weighting conversions by product, by margin, by deal size, by sales-cycle stage, by lifetime value — requires three things most retainers don’t fund. It requires the client to tell the agency what each conversion is worth (which most clients haven’t formalised). It requires conversion-value tracking inside Google Ads, with values feeding through from your forms or your CRM (technical setup). And it requires the agency to optimise toward target ROAS or value-based bidding instead of the simpler cost-per-conversion targets, which means more variability in the early weeks and more explanation in the report meeting.

So the easy version wins. The agency hits cost-per-lead targets. Budget flows toward whichever product happens to be cheapest to lead-gen. Your strategy is a footnote on slide twelve.

What it looks like in your report or account

Spend allocation does not match the priority order you’ve communicated. The product line you’ve told the agency matters most is getting middling or low budget share. The campaign manager defends this with “that’s where the conversions are coming from.”
Conversion actions in Google Ads are configured without values, or with placeholder values like “1,” meaning every conversion is treated as equivalent.
Bidding strategies are set to “Maximise Conversions” or “Target CPA,” not “Maximise Conversion Value” or “Target ROAS.”
The report celebrates “efficient lead generation” without referencing which product the leads were for.
When you ask for a margin-weighted view of spend — “show me dollars spent and dollars produced by product line” — the agency takes a week to produce something that should be a five-minute pull, because the underlying conversion structure doesn’t support it.

Concrete example A B2B equipment manufacturer told their agency that the strategic line for the year was a new high-margin service contract, with leads worth roughly $18,000 in average lifetime value. The agency ran the account for six months optimising to a $220 cost-per-lead target across all conversions equally. Spend skewed heavily toward a legacy parts category that converted at $80 per lead but produced $1,200 in average value. The cost-per-lead number looked great. Margin-weighted return on ad spend was a fraction of what it should have been. The fix — configuring conversion values, switching to value-based bidding, and reweighting the campaign mix — took about three weeks of focused work and produced a 2.4x improvement in revenue per ad dollar over the next quarter, with the same total budget.

What to ask your agency

Two questions, in this order.

First: “What conversion value is currently configured for each of our conversion actions in Google Ads, and how was that value derived?”

Second: “If I told you Product A is twice as strategically valuable to us as Product B, how would the campaigns reflect that — specifically, what changes? ”

Good answer

“Each conversion action carries a value derived from your average deal size by product line, refreshed quarterly with your finance team — A is at $14,200, B at $3,800, C at $1,100. We’re running Maximise Conversion Value across the relevant campaigns and Target ROAS where we have enough data. If A becomes twice as valuable, we’d update the value at the conversion-action level, and the bidding algorithm would shift budget within a few weeks. We’d also rebalance budgets at the campaign level immediately to accelerate the shift. Here’s a model of what the next 60 days would look like under that change.”

Bad answer

“We’re currently optimising to a blended cost per lead target across all campaigns. Conversion values aren’t configured at the action level — we manage priority by adjusting budgets manually based on performance. Right now, Product B is producing the most efficient cost per lead, so it’s receiving more of the budget. Happy to discuss reallocating if you’d like to push more budget toward A.”

What it means if you get the bad answer

It means your strategic priority is not encoded anywhere the algorithm can see. The agency is using one number — cost per lead — as a stand-in for the entire economic decision about where money should go. As long as that one number looks good in the deck, the underlying allocation is invisible. The agency has, without saying so out loud, decided that the auction’s view of efficiency outranks your view of strategy.

The fix is genuinely technical and requires both sides to do work. You owe the agency a written ranking of conversion value by product, line of business, or deal type, with rough numbers attached — even imperfect numbers, because $14,000 vs. $3,000 is a directional signal the algorithm can use. The agency owes you proper conversion-value tracking, the right bidding strategy, and a campaign structure that can be rebalanced when your priorities change. That conversation is what a real partnership looks like.

If the conversation produces shrugs on the agency side — “we just optimise to cost per lead, that’s our methodology” — you’ve learned where the ceiling is on what the agency is willing to do. Your portfolio strategy should not be downstream of an account manager’s methodology. If you want help putting numbers on this for your own account, that’s a good free question.