Advertising can be flashy and creative, but the underbelly of marketing is analytical as hell. Especially digital marketing, where the foundation is built on numbers and data. Wait, don't stop reading! Understanding the mathematical language of marketing doesn't have to be hard or boring. Starting with the basics of how to measure campaign performance, here are the metrics you and your team should should know to digitally advertise like a pro.
Cost-Per-Click (CPC)
If the payment model for your advertisement is Pay Per Click, cost-per-click (CPC) is a metric that is top of mind. This indicates how much you’ll pay per click on an ad. There are a number of factors that go into determining CPC on platforms like Google Ads or Bing Ads:
Maximum bid
Ad ranking against competitors
And quality score (this is used by Google, Bing, and Yahoo; there are a number of factors that go into this as well)
Advertisers want to keep CPC low since it has a direct impact on their return-on-investment (ROI). Like anything in marketing: You want more out of what you put in.
Cost Per Action (CPA)
Cost-per-action, or cost-per-acquisition, is based on activities vs. clicks. For CPA advertisement models, you pay ad hosts a certain fee once a specific action is met. This might be:
CPA per lead
CPA per demos booked
CPA per closed/won opportunity
How this payment is calculated often depends on the type of goal in mind. For example, generating leads might involve a set price, while generating sales might involve a percentage of the sale.
Cost-Per-Mille (CPM)
Who knew Latin would find its way into the advertising game? Cost-per-mille, where “mille” means thousand in Latin, refers to the cost incurred per thousand customers who viewed your ad. This is often confused with CPI (cost-per-impression) which is the cost per one potential customer seeing your ad.
CPM and CPI are similar to other traditional advertising models you’re familiar with: TV and radio. The goal of this method is similar to that of TV advertising: visibility. If the goal of your online ad is to get visibility across a digital channel, then CPM might make sense for you.
Click-Through Rate (CTR)
CTR refers to the percentage of people that actually clicked on your ad. This is determined by dividing the number of total clicks and the number of total impressions.
CTR has a direct influence on the value and relevance placed on your ad by advertising platforms. Your quality score then impacts the position of your paid search ad online against others and how often your ad is served in display and paid social media.
Conversion Rate (CVR)
There’s a reason we put “conversion rate” or CVR at the end of this section. That’s because no matter how many clicks you generate, or how many impressions you get, if there’s no impact on your bottom line, none of it really matters.
Simply put, CVR is the average number of conversions per ad. Conversions are actions that you’ve said hold some kind of business value. Business value is defined by you and can be anything from a purchase or closed deal, to starting a conversation.
CVR is a major sticking point for many digital marketers and can greatly impact their visibility into ROI. That’s because there are two important factors to consider when determining CVR:
Business value
The number of conversion actions
Issues arise when marketers fail to define these in a meaningful way across an organization. It is the job of a digital marketer to make these definitions and goals clear to their team and senior management so reporting around digital advertising ROI is accurate.
Want some help ? A dXm eXpert can guide you through all the metrics in digital marketing, and help you choose the right ones to measure your campaigns . Sign up here.