Key performance indicators (KPIs) are the metric that marketers most commonly use to determine how their campaigns are progressing, and what areas need tweaking to make them more effective.
If you’re running a pay-per-click (PPC) campaign, you need real-world data to determine your return-on-investment (ROI), and there are five essential KPIs you need to monitor to ensure long-term success.
When visitors come to your site and perform some type of call-to-action (CTA) like subscribing to a newsletter or buying a product or service, this is known as a conversion.
And if you want to know how many ad clicks directly led to a conversion, you need to monitor the conversion rate.
This lets you know exactly which of your PPC advertising campaigns are leading to the highest conversion rates.
For example, if you know that you need 500 conversions to meet your annual goals, and you expect your PPC campaign to yield about 5,000 impressions (number of times your ad is displayed to a user, regardless if that user clicked on it or not), you know that your conversion rate has to hover around 10 percent for you to achieve your goals.
So if your conversion rate is at five or six percent, you know that you will have adjust your ads to boost that rate closer to your target, or you will fall short of your goal.
Adjusting your ads can involve changing keywords, making your CTA bolder and more distinct, or changing the offer.
For example, if your PPC ad is offering a free eBook, you may want to test out whether offering a week’s free service, or a discount on a product is a better attractor than an eBook.
A click-through rate (CTR) refers to the number of people who saw your ad and were enticed to click on that ad.
This is the first step of converting a customer, because if people see your ad (impression), but don’t think enough of that ad to click, you have no chance to persuade them any further.
Taking the total number of people who clicked on your ad and dividing that number by the total ad impressions is how CTR is measured.
So if you had 500 clicks and 1000 impressions, your CTR would be 50 percent, which is phenomenal, because half the people who saw your ad clicked to a landing page.
The one thing to remember with CTR is that it can be deceptive, because even though you may have a rate that is two or three percent, you have to keep that number in context by knowing the average CTR in your industry.
If the average CTR in the computer software industry is two percent, and you’re at 2.2 percent, you know that you’re exceeding industry standards, even if that CTR looks low in general terms.
Cost Per Acquisition
Cost per acquisition (CPA) tells you how much it is costing you to acquire a customer with your PPC ads.
The word ‘acquisition’ is a bit tricky in this context, because some businesses define an acquisition as a visitor who subscribes to a newsletter, while others define it as a visitor who actually makes a purchase of some kind.
That’s why most PPC ad services like Google AdWords let you set up a metric for CPA or for cost-per transaction.
But regardless of how you define an acquisition, the CPA will tell you how much you are spending to acquire a customer, which in turn lets you know whether your ROI is where it should be.
Because if you’re spending too much to get a customer, and that customer doesn’t buy enough to justify your spending, your ROI will drop, which probably means you need to adjust or completely change your ad campaign.
Cost Per Click
Cost per click (CPC) tells you how much it costs to get a visitor to click on your ad.
Taking the total cost of your advertising campaign and dividing it by the number ads that users clicked is how CPC is calculated.
Knowing how much you have to spend on your PPC ads to get a specific number of clicks can help you determine which ads are the most effective in terms of click-rate, and which ads you may need to drop because they are not generating enough clicks for a good ROI.
Number of Impressions
As mentioned before, impressions refer to how many people see your ads even if they don’t click on those ads.
So if people don’t click on your ads, why are impressions important?
They are important because companies implement PPC ad campaigns for different reasons.
Some businesses are looking to increasing conversion rates, while others want to increase brand awareness with their campaigns.
And for those companies focused more on brand awareness, impressions is a huge metric, because the more people who view their ads, the more likely it is that they will remember the name of a company, its logo, or a catchphrase.
Obviously, a company focused on brand awareness would love for people who see its ads to click on those ads so that they can further engage with the company’s products and services.
But if you’re trying to maximize impressions, you need to be prudent in how you select your keywords.
In fact, it is most effective to choose what are known as exact match keywords, because your ads will show up in more queries.
So instead of a keyword like ‘computer software,’ you would use an exact match keyword such as ‘buy computer software,’ which helps target your ads to users’ exact queries.
Measure, Analyze and Respond
Your PPC management must include constant monitoring to ensure that you are reaching your goals. But once you have the data you need, you have to make hard choices about what’s working, what’s not working, and how to implement an improved campaign.
It is this type of consistent evaluation that will get you the best results. Contact us today to see how we can help create a winning PPC ad campaign.
Diona is a senior Internet marketing consultant at Knowmad. Her areas of expertise include digital marketing strategy, project management, brand management, search engine optimization (SEO), pay per click advertising, inbound marketing, content marketing, conversion rate optimization, social media marketing and website design.