30 Mar ROI, KPI, CPC: Alphabet Soup of Analyzing Digital Ad Success
We routinely create reports for our clients to show how their digital advertising is performing. We view these reports weekly to keep track of which ads are garnering the response we want and which ones are costing too much with too few results. If you’re not accustomed to looking at marketing analytics, it’s easy to get lost in the sea of acronyms and other words. The numbers can sometimes look impressive without actually getting your business anywhere.
This cheat sheet of digital ad analytic buzz words should help you not only understand what all the terms mean but why and when they are important to your business.
KPI: Key Performance Indicators
You won’t see this term on your analytics page instead you and your marketing director should determine what information is key to your ad’s success based on your goals. If your goal is to sell 200 widgets, then your KPI would be sales. If your goal is to increase name recognition, then a KPI might be impressions, reach, or recall. KPI just means what are the most important numbers in the report to you. Your marketing director should filter out all the unimportant numbers so you can focus and measure what matters.
ROI: Return On Investment
Another term you won’t find on your analytics datasheet. Your ROI will determine which KPIs you track. Confused, yet? Your return on investment boils down to your goals. If you sell 200 widgets, how much money will you make compared to what you spent? If you reach 100,000 people, what did it cost you to get there? Knowing what you want to accomplish determines which metrics matter to you. Every marketing campaign starts with having firm answers to these two questions.
Simply put reach is the number of times unduplicated viewers saw your ad. If your neighbor sees your ad three times, it counts as one person reached. If you’re looking to reach the largest audience possible, this number would be at the top of your list.
This number measures the number of times anyone saw your ad, including duplicates. If your neighbor saw your ad three times, it counts as three impressions. If you’re looking to increase your name recognition among a specific group, you’ll want to see an impression number that’s much higher than your reach number.
Even if your main goal isn’t link clicks, Facebook and Google will measure that anyway. This number shows how many people clicked on your ad to go to a landing page or your website. This number measures how engaging your ad is. If you’re receiving a lot of link clicks, but very few conversions or phone calls from your website, you may have a disconnect between your digital ad and your website. Or you may be targeting the wrong audience.
Cost Per Click (CPC)
Link clicks and CPC go hand in hand. The lower your CPC the less it costs you to send people to your website or landing page. CPC can go down for ads with high engagement because Facebook or Google sees that ad as providing value and they reward you for it. When you see your CPC start to rise, it’s time to think about redesigning your ad or tweaking your audience.
Cost Per Result
This metric is more of a Facebook metric. When you set up ads on the ads dashboard, you choose your goal. If you want to reach the highest number of people at the lowest cost, the cost per result is usually what it costs you to reach 1,000 people. If you’re measuring sales, it will tell you what it cost for you to convert one viewer into a customer.
This one is probably the most self-explanatory. If your ad includes a video, you can measure how many people viewed what percentage of the video. This gives you information about how well your video held their attention and maybe whether you should choose shorter videos in future ads. (This metric can be used to re-target future ads to people who watched a certain percentage of your video.)
Best practices suggest creating two versions of every ad and changing one element to see what difference the element makes. For instance, we’ve found pictures of sick people perform better in medical clinic ads about illness than images of well people. That goes against all the “rules” of advertising we’ve heard, but that’s what our tests show. We’ve also found in Google ads people respond to search ads that show a business is local and has decades of experience better than search ads about products. We tweak our ads based on the results with the goal of increasing engagement while decreasing cost.
These terms give you and your marketing director a full picture of which ads are performing the best and which ones are costing the most to run. With multiple months of ad metrics to view, you may also find some months to be more expensive for ad costs.
For our marketing friends who already know all this information, you can learn how to create customized Facebook reports from this Social Media Examiner article. If, on the other hand, you’re having trouble understanding your digital ad metrics, or aren’t sure where to start determining your goals and measuring your ads, we’re ready to help. Shoot us an email to request your free 30-minute consultation.