With any of your marketing efforts, you want to be sure you’re getting a positive return on investment (ROI). This is especially true when you’re paying for advertising.
With a pay-per-click (PPC) campaign, it can seem difficult and overwhelming to determine if your investment of time and money is paying off. So, let’s look at various ways you can track and measure the efficiency of your PPC investments.
Just to get on the same page, let’s define PPC. This is a form of Internet marketing in which you pay a fee each time your advertisement is clicked on by a user. Basically, you’re paying to get visitors to your site, rather than having them arrive via an organic search. One of the most popular forms of PPC is search engine advertising. This lets you bid for ad placement in a sponsored link when a search includes one of the keywords related to what your business is selling.
For instance, if you have an online clothing store, and someone searches “women’s cotton pants,” your business advertisement appears in the search engine results.
To examine the ROI of a PPC advertising campaign, it’s important to understand your Key Performance Indicators (KPIs) in the planning stage of your campaign. Establishing the goals for the campaign will help you establish the means to measure those goals. Then you can analyze results immediately and throughout the campaign.
Like everything you do in business, having goals and aligning your work with your goals is vital. Your objectives may vary for each campaign, with some examples including:
- Boosting traffic to your website.
- Increasing your product’s brand recognition.
- Signing customers up for a newsletter to build an email address base.
- Converting those leads to sales.
Having clear goals allows you to focus on certain KPIs over others, and helps you determine which metrics will give you the insight into those KPIs.
So while there are many metrics that provide insight into campaign success, let’s look at the important KPIs that you should pay attention to when running a PPC advertising campaign.
The Important KPIs
#1. Impressions, Clicks and Click-Through Rate
These metrics are important ones to track. Impressions measures the number of times your ad is displayed and clicks are the number of times those impressions get clicked on.
Together, these two metrics can tell you how well your impressions converted into click-throughs. A high number of clicks mean your ad was attractive to customers.
To generate your Click-Through Rate (CTR), divide the number of clicks by the number of impressions. It’s good to track your CTR throughout the life of the campaign.
For instance, if the number of people who saw the ad was 40 but only 10 clicked on it, your CTR is 25%. You’ll want to improve that rate.
|Click Through Rate (CTR) =||Number of clicks
Number of impressions
As you monitor your numbers, if clicks continue to increase, it might be worthwhile to increase your advertising budget to take advantage of that increase. If the number goes down, you might need to adjust and improve your ad. Check for message clarity, quality keywords, and emotional appeal to be sure the ad is resonating with users.
#2. Conversion Rate
This is a crucial investment metric. A conversion rate tells you how many users that clicked through to your site actually completed your desired action. That can be submitting a form, signing up for a newsletter, or purchasing a product. While CTR is important, it doesn’t matter if customers click through to your landing page and don’t complete the action you want them to!
|Conversion Rate =||Number of people who completed the desired action
Number of people who clicked on the ad
In order to enhance your conversion rate, it’s important to have a great user experience on your landing page. That means ensuring the page is mobile friendly and performs well on all devices. It also means paying attention to other user-friendly factors like having forms and buttons visible and having fast page load speed. Even adding a quality image or video to your page can entice customers to complete the action you desire.
#3. Bounce Rate
What could be thought of as the opposite of conversion rate is your bounce rate. This measures the number of visitors who went to your site and then left without completing the desired action. If you have a high bounce rate, you need to look at your landing page for improvements. Similar to enhancing your conversion rate, making adjustments to ensure the landing page is user-friendly, with a clear call to action, can help lower your bounce rate.
#4. Impression Share
This is another good metric to quantify the quality of your ad. This number shows the number of times your ad was displayed compared to the number of times it was eligible to be displayed – when the keyword was used in a search. For instance, if your keyword was searched 100 times but your ad only showed up 80 times, the impression share is 80% and you also have a 20% lost impression share.
Using this information, you can calculate the click-throughs and conversions you could have received (using the lost impression share) and you can also decide whether to eliminate keywords that aren’t providing results.
It can also tell you what keywords are providing results, and give you an idea of your exposure to audiences based on those keywords.
|Impression Share =||Number of times your advertisement was displayed
Number of searches performed for the keyword
#5. Quality Score
Google assigns this number based on the previous CTR of your landing page and your keywords. This number tracks whether users have a relevant and positive experience after seeing your ad and clicking through to your landing page.
Google uses this to rank PPC campaigns and ensures the most relevant ads are placed high on search results pages. In other words, the highest positions go to the most relevant ads.
To determine the Quality Score, Google uses the following factors:
- The relevance of the keyword to its ad group
- Landing page quality
- The relevance of the advertising text
- Performance on previous Google ads
When you get a high Quality Score on an ad, you then enjoy higher rankings for a lower cost per click. Therefore, it’s important to pay attention to landing page quality and ad copy and refine keywords. This can help improve your Quality Score.
#6. Cost Per Click
This metric is straightforward but still important. The average amount you pay for each ad click is known as cost per click (CPC).
#7. Cost Per Acquisition/Conversion
This metric is calculated by dividing the total amount spent by the number of acquisitions/conversions. This can tell you how much you’ve paid for every new customer.
For example, if you spent $200 on a PPC campaign and only achieve four conversions, your cost per acquisition (CPA) would be $50.
|CPA =||Total amount spent on campaign
Number of acquisitions
Obviously, the amount of profit you gain per acquisition will play into whether your CPA is good or not. If you make $500 on each acquisition, then spending $50 an acquisition in a PPC campaign may be worth it.
It can also be argued that there’s a connection between CPA and Quality Score. For instance, optimizing your campaign for a high Quality Score can lower your CPC, which in turn will lower your CPA.
Related to your CPA is Wasted Spend. This number is really the opposite of your CPA because it means the money spent that doesn’t result in an acquisition. If this number goes up, you need to make adjustments to your campaign, such as improving keyword use.
#8. Return on Advertising Spend (ROAS)
This KPI is where the rubber hits the road – how much have you spent on ads in comparison to the revenue earned from them? This can be considered the ultimate indicator of ROI on a campaign as it tells you how much revenue you earned for every dollar spent. Your break-even point should be a dollar earned for every dollar spent ($1:$1).
Let’s say you spent $1000 on a PPC campaign and made $5000 in gross revenue as a result of the campaign. This tells you that for every $1 you spent advertising, you earned $5 in revenue. This can help inform your budgeting and can tell you how marketing has supported the bottom line of your business.
|ROAS =||Gross Revenue ($5000)
PPC campaign ($1000)
You can also get a true sense of ROI by taking into consideration the costs that go into the campaign. Here’s another way to consider ROAS.
|ROAS =||PPC Revenue – PPC Cost
Choosing What to Measure
Now that you have a good handle on the vital KPIs to track and measure as part of your PPC campaign, it’s time to choose which ones on which you should focus. That means coming back to your goals and aligning your measurement with those.
Here are some options for you.
The Goal is to Capture More Leads
If your priority is lead generation, focus on tracking conversions. This means looking at form completions, subscriptions, purchases, or whatever your conversion target may be. You can also look at your cost per lead (click through).
The Goal is to Increase Conversion Rate
To do this, keep an eye on weekly, monthly or even annual metrics for CTR, cost per click and conversion rates.
The Goal is to Rank High in Google Search Results
This goal may vary depending on how much you are willing and able to spend per click. To measure this, analyze your total impressions and impression share. You would want your impression share to be high, let’s say 98% or better, and you should maintain an average position of 5 or higher.
If your impression share is low, you may want to determine what keywords will bring the best results and bid high on those to improve your share.
Embarking on a PPC campaign is an investment of both time and money for your business. It’s important to plan carefully, establish goals and a budget before you start the work.
Once the campaign begins, monitoring and adjusting are important. The KPIs we have outlined for you will help ensure you can measure the efficiency of your PPC investments. Now that you know what KPIs are important for you to measure and track, here are some options for you in choosing a PPC optimization tool.
With the right planning and execution, a PPC campaign will drive customers to your site and increase profits for your business.
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