You can't improve what you don't measure. When dealing with advertising, whether for your own business or your clients, results matter. However, there is so much you can track that it can become overwhelming. Well, not anymore. Let's talk about the most important advertising KPIs and how to track them.
Feb 10 2020 ● 5 min read
Advertising usually means you're dealing with some sort of a budget and you're in charge of driving new customers to a business. Whoever you're reporting to, they want to see progress in form of some metrics and choosing those digital marketing metrics is crucial for a few reasons:
KPIs in advertising are direction indicators for your digital advertising campaigns. Marketers use them to quantify progress towards important business goals. Meeting, exceeding or missing an advertising KPI often signals whether an advertising campaign has been a success or failure.
So, what advertising KPIs are the most important to track to find out if your campaign works? Today, we rounded up 10 of the very best to get you inspired.
According to many marketers, ROAS is one of the most important marketing KPIs because it shows if your ad campaign and marketing efforts are successful or not. In short, it tells you how much money you can get by investing a certain amount. For example, if you invest $1 in advertising and get $2 back, that's a 100% ROAS and an amazing result.
It’s simple; you need to know your ROAS to see if you’re getting out more than you put in. The higher the ROAS, the better your performance. This KPI measures how much money you generate in revenue for the budget you spend.
You'll find that executives and CEOs will be fond of this KPI because it can tell them in seconds whether marketing campaigns are working or not, without digging deep into more detailed metrics.
CPA is the cost of acquiring a single user, whether it's a paying customer or not. A lot goes into your CPA, including the costs spent on marketing and sales, sometimes even the salaries of those teams. Naturally, you want to keep your CPA as low as possible to be profitable.
The Google Ads metrics cost per conversion and cost per acquisition are used interchangeably. However, they could not be further from each other. A conversion is just a part of the funnel, while the acquisition encompasses all the steps to acquire a new customer.
Generally, you see cost per conversion when viewing reports, and cost per acquisition when bidding for terms. You can build reports using KPI reporting tool. Cost per action, on the other hand, is a Facebook KPI that tracks actions people took on your ads.
Cost per acquisition reveals the financial impact of your ad campaigns, giving you an indication of your Return on Investment for your digital marketing campaigns.
When it comes to cost per conversion, marketers agree that you should try to bring it down. Understanding this KPI allows you to change your marketing strategy based on data.
Knowing the cost to acquire a new customer, client, or qualified leads on a per-channel basis allows you to analyze your existing ad efforts and strategies, create new ones, and reallocate marketing budgets and ad spend accordingly.
This KPI reveals how much you spend to get a paying customer, so it’s different than CPA. You must know your CAC to give your service or product the right price. This metric works hand-in-hand with Lifetime Value or LTV – the revenue you expect from an average customer over their lifetime of being with you.
The ideal ratio of these two metrics is about 1:3 (CAC: LTV), so your CAC should always be significantly lower than your LTV for your business to succeed. In other words, you should spend only a fraction of the money the customer will spend with you to get them as a paying customer.
Here’s how to get your conversion rate: divide the number of your conversions by the number of your clicks, expressed as a percentage. For example, the average conversion rate for an online business is around 2% for years now. That means that for each 100 visitors to your website, about 2% will convert.
What a conversion is depends on your business model and funnel. It can be a sign up to a free trial, a booked demo, an upgrade from a free trial to a paying customer or something else.
Knowing who’s converting and what’s working can help you make the necessary changes to increase your ROI. A low conversion rate means that something needs fixing: your offer, your messaging, the placement or the entire funnel. In any case, it's an excellent starting point for further marketing research.
This KPI shows the number of times users click on your ad per the number of total users who saw it. A high click-through rate indicates your ads are driving many people to your offer.
The more clicks, the more people are interested in whatever it is you’re promoting. A low CTR, on the other hand, shows that you share content that’s not interesting enough for your audience.
Remember that your CTR is impacted by many things, but primarily, you should focus on the messaging and the offer. In the case of PPC, the keyword you're targeting will also have a major impact on your CTR.
This KPI reveals how much you spend when a user clicks on your ad. Ideally, you want your CPC to be low as possible. Unfortunately, good keywords often have a high CPC because of the tight competition for them.
Quality Score is one of the most important KPIs for PPC advertisers as it shows the relevance and quality of your PPC ads and keywords. This metric is necessary to determine your CPC and ad rank.
The rating ranges from 1 to 10 – the higher, the better. A good quality score has a positive impact on your ad expenses and impression shares. This is usually a ranking from 7 to 10. It means you pay less for your Google ads. A low quality score means you need to pay more, and a ranking that’s lower than 7.
This KPI shows how many times a unique user sees your ad. It gets calculated by dividing your total ad impressions by the ad reach. Knowing this information can help you understand if you’ve already exhausted your audience and whether you should continue optimizing a specific sales funnel and ad creative.
High frequency increases the risk of ad fatigue and low performance. Tracking frequency is crucial for retargeting audiences. It can tell you if you are wasting your ad budget and annoying your audience.
A user has interacted with your ad, so now you expect them to take another action on your website. It could be making a purchase, starting a free trial, adding an item to a cart, etc.
Website conversions can help you see the actions that users take after clicking through your ad. This is important as it lets you know whether you have targeted the right audience.
You can have 10,000 website visitors every month who click on your ad but then bounce because they are not interested in your ad. This is worse than having only 100 website visitors that find your content relevant and are interested in your service or product.
Website conversions tell you if the people that get to your landing page are taking some type of action, like making a purchase or submitting a form. If they are not taking any action, it’s best to optimize your campaign and reevaluate your targeting strategy.
This KPI reveals the intent and behavior of your audience, and that’s why it’s one of the most important KPIs for advertising.
There is plenty of advertising KPIs to track to ensure the success of your ad campaigns and business. These are some of the most important KPIs that can tell you if you’re moving in the right direction, or you are just wasting your time and money.
If you're ready to start tracking your advertising KPIs in a more effective way, you need a proper tool for your marketing reporting. Sign up for a free trial of Whatagraph today and see for yourself that tracking your advertising KPIs is a matter of a few clicks.
Published on Feb 10 2020
WRITTEN BY
Mile ZivkovicMile is the head of content at Whatagraph in charge of all content and communications for Whatagraph’s marketing data platform. A marketing heavy with almost a decade of SaaS industry experience, Mile has managed multiple content marketing teams without losing an ounce of his writing passion. The author behind some of the most-read pieces on our blog.
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