In today’s digital landscape, collecting data has become incredibly simple. There are now myriads of platforms, tools and methodologies for harvesting data points surrounding the performance of a pay-per-click campaign. Moreover, there are more metrics than ever to analyze: cost-per-click, cost-per-acquisition, impressions and tons of other markers.
However, with all this information at hand, the question is now becoming, “How do we analyze all this data to help us focus on the challenges we face, the insights we need and the goals we aim to reach?”
While data can be an extremely fruitful commodity, if brands are unable to accurately interpret the statistics to cut through the noise, it’s all for naught.
For this reason, it is advisable to zero-in on a single metric that the company finds to be of the utmost importance in reaching predetermined goals. When reviewing account performance, advertisers should focus on one metric as the most important one to grow a business efficiently. For example, most eCommerce clients care most about ROAS (return on ad spend), so CTR (click-through rate), CPC (cost per click) or even average position do not matter as much as long as the intended result is achieved.
This concept may sound foreign to many, so let’s break down why it is important to target a single metric and which data points advertisers might want to place at the heart of their PPC efforts.
Why Concentrate on a Single Metric?
Years ago, most non-specialists were only aware of click-through rates, so when talking to PPC experts, they would concentrate on CTR as they were under the impression that this was the all-important metric to success. However, this metric is only a small part of the whole picture. While this kind of thinking has evolved over the years for many business owners, it still lingers in the minds of some business professionals.
For a PPC campaign to be considered a success, businesses and marketers must draw a line in the sand and define what success means to them. This means that there must be a definitive focus. And truthfully, it is better to be overly focused on a single element than to live in an undefined haze of ambiguity.
The most effective way to run a PPC campaign is to make sure that all parties agree on the end goal of the advertising push.
Therefore, when selecting a metric to concentrate on, that marker becomes the main focus. Everything else merely helps point to its success or failure and supports the singular cause.
For example, if a company elects ROAS for its focus, then other metrics like CPA and CPC merely help to indicate the health of the targeted parameter.
Firstly, it is essential to understand that CPM (cost per 1,000 impressions) is not equal to reach. Reach tells advertisers the number of unique individuals who viewed an ad. Impressions are an indicator of the ad’s total views, meaning that the same consumers could have seen a promotion multiple times.
For example, if an ad received 10,000 impressions, it could be that only half of those views were unique. What all this says is that impressions have precisely zero impact on a campaign’s bottom line and are utterly unrelated to a campaign’s ultimate goal.
Then why in the world would anyone want to measure ad impressions?
Simply put, impressions are used mainly when the advertising is for branding purposes. A business wants to have as many people as possible see the advertising while the actual actions taken are secondary. By getting in front of potential audiences, a brand can increase its awareness and recall by merely having its ads seen.
However, impressions can be tricky business as it is vital to ensure that people are still clicking on the ads. Otherwise, the adverts will slowly start losing search impression share and relevance, thereby harming an ad’s Quality Score.
Click-Through Rate (CTR)
As mentioned earlier, CTR is one of the most popular PPC metrics, and it can be a vital one in helping to measure a campaign’s performance.
Click-through rates inform advertisers on how many times a consumer actually clicked on an ad and followed it to its associated landing page. This metric is useful for determining the efficacy of an ad’s offer, copy and other elements that help lure people to a site.
Finding a campaign’s CTR is done by dividing the total number of clicks an ad received within a specific reporting period (typically one month) by the total number of impressions it received and multiplying that figure by 100 to express it as a percent.
Therefore, if an ad generated 10,000 impressions and earned 1,000 clicks, the ad’s click-through rate is 10 percent.
Understanding a campaign’s CTR, while valuable in determining how effectively the ad drives clicks, does not indicate success unto itself as this metric says nothing about conversions or sales. Therefore, the data point is best suited for generating traffic and testing new copy and other ad elements.
Furthermore, it is essential to keep in mind that CTR can vary widely for different industries, so there is no “ideal” target to hit. For instance, studies on industry CTR rates reveal that the average search CTR for the auto industry was four percent while eCommerce was generating 2.69 percent. Technology, on the other hand, only reached a 2.09 percent CTR.
This kind of information can help provide advertisers and business owners with a benchmark to utilize for determining their own CTR success.
PPC budgets are a predetermined factor when establishing a campaign (or, at least, they should be). Therefore, advertisers know how much they have to bid with going into the effort; however, this does not mean that is what gets paid in the end.
In the bidding process, PPC advertisers will aim to out-price one another for ad positions. Therefore, as the price of the bid goes up, so does a campaign’s CPC.
Cost-per-click measurements establish how much a campaign paid for each click-through. CPC can be easily measured by dividing the campaign’s total cost by the number of clicks that were generated.
Cost-per-click is good for when you want to generate a lot of traffic to a website. This can be used effectively when conversions on the site aren’t measured, or there is no specific action to be taken on the site.
However, it is critical to note that as a campaign’s CPC rises, its return on investment (ROI) tends to fall as a result, but not always. This seems like a rather obvious dynamic to some as the more an advertiser pays, the less is likely to be made. Therefore, it is essential to be competitive with bids, while keeping the max CPC bid at a reasonable price. There are instances where this rule does not apply because some industries generate a better ROAS with a larger share of top impression share, however, this is the exception to the rule.
Cost-per-acquisition is typically used when there is not a specific value assigned to the acquisition. This is usually good for newsletter signups, lead information and similar actions that don’ target a defined amount.
Typically, when bidding, advertisers have the option to choose between targeting cost-per-click, impressions or cost-per-acquisition. Which is selected ultimately comes down to the goals of the campaign.
Advertisers can find the CPA by dividing the total cost of the campaign by the number of customers or leads generated by the effort. However, this metric can be a bit more challenging to quantify as marketers should not only factor in the actual cost of the campaign but also time spent, assets created and other periphery elements.
Return on Ad Spend (ROAS)
For most eCommerce businesses, ROAS is the holy grail of metrics. Most of these types of brands target ROAS because they want to know how much revenue the ad budget generated definitively.
ROAS is the revenue generated by a campaign, compared to the amount of money it cost to run that advertising push.
Because of the direct impact return on ad spend has on a company’s bottom line, this is often considered the most important metrics to focus on for PPC campaigns. By virtue of that, all the other metrics tend to merely play a supporting role in analyzing ROAS.
In a nutshell, ROAS can inform business owners and marketers on the effectiveness of their PPC campaigns and, in turn, enable them to determine how to invest future ad budgets in a fruitful manner. Moreover, this metric can help point to the relevance of intent for keywords utilized within the campaign.
However, for return on ad spend to give an accurate picture of how it is ultimately impacting a business, it is necessary to take into consideration the profit margins of the campaigns alongside the brand’s ad budget.
For instance, eCommerce organizations that are functioning under high operating expenses due to product acquisition, storage, shipping logistics and various other moving parts would be far less satisfied with a ROAS of two to one than eight to one.
When creating reports and measuring the effectiveness of PPC advertising campaigns, a single metric should be highlighted and stand center stage, away from all others. Moreover, conversations should focus on that metric as the others are only acting to support the result.
By adopting a more targeted, refined approach to PPC performance analyzation, advertisers can help brands obtain significant growth in shorter periods as the time spent analyzing a variety of metrics, pulling promoters’ attention and priorities in various directions will be minimized, thereby enhancing the gains that can be made through focusing single-mindedly on a unique metric.
While this strategy can take a bit of getting used to, in the long run, it will produce far more robust results for all parties involved.
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Ronald Dod is the Chief Marketing Officer and Co-founder of Visiture, an end-to-end eCommerce marketing agency focused on helping online merchants acquire more customers through the use of search engines, social media platforms, marketplaces, and their online storefronts. His passion is helping leading brands use data to make more effective decisions in order to drive new traffic and conversions.
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