By Bill Fukui, Director of Sales & Marketing
“Half the money I spend on advertising is wasted; the trouble is I don't know which half!” - John Wanamaker
Many practices have simply decided they don’t believe PPC advertising without really understanding how it can deliver profitable results.
However, for practices committed to include pay-per-click search engine advertising as part of a more diversified campaign, getting a grip on the right half is key to generating a high return on your investment. This “How-To” article identifies some common PPC Key Performance Indicators (KPI). But even more important, it provides insights to the relative value of each, so you can make better decisions on what’s working and what needs to be cut out.
Impressions is a common advertising description that simply identifies how many searchers saw your ad in a given period of time. Impressions show you if your ad is reaching the volume of searchers to generate the traffic and leads you want. In the PPC world, an impression is when your ad appears somewhere on the page of a search result.
In the case of Traffic-focused data, you will probably view a report similar to this:
In the vast majority of cases, PPC is used primarily as a direct response advertising strategy, meaning your focus is on clicks, traffic and leads. In this case, Impressions is not the primary metric you want to focus on. In situations and strategies where your main goal is to get your name out, expand your brand recognition, etc. than Impressions will play a larger role.
Click-Through Rate (CTR)
Click-through rate is one of the most important performance indicators for your PPC advertising campaign. It is not focused on identifying specific costs, but rather the effectiveness of your PPC ad (and possibly placement). CTR is an indication of how well your ad “connects” with the search engine users your campaign is targeting. CTR tells you how many people see your ads in search engine results and like them enough to click on them.
The CTR for each of the campaigns in the above chart is derived by: Clicks ÷ Ad Impressions = CTR
Of course the title of your ad and the description that is used must be highly relevant to the search phrase your campaign is targeting. The more relevant and in sync your ad is to searchers, the higher the CTR.
In cases where a campaign may have a low number of clicks, even after running it for a reasonable amount of time, practices may assume the ad isn’t working; and they change the ad copy. But what if the ad has a low volume of impressions? Your CTR may still be high, so you want to focus on getting more impressions instead of trying to make your ad more clickable. This would suggest adjusting your keywords and bidding (position on the page). If you have high placement and lots of impressions with low clicks, then it probably makes sense to adjust your ad or target more relevant keywords.
Cost Per Click (CPC)
The most common data that practices use to judge the efficiency of their PPC media buys is the cost-per-click. It is the most natural data point that practices can identify to start understanding their digital advertising investment. It is also one of the primary reasons why some PPC campaigns are prematurely suspended (we will address it later).
The CPC is simply the cost for a visitor to click on your ad and it is derived by simply: Cost ÷ Clicks = CPC.
In this case, the first initial observation is that the CPC for campaign 4 (highlighted in red) is significantly higher and may be a concern. Campaign 5 has the lowest average cost, which may be appealing.
However, as compelling as it is to fixate on CPC figures, it shouldn’t be the only or primary information you use to make changes in your campaign.
In order to get a more comprehensive view of the effectiveness of your campaign you need to add other indicators beyond traffic and even costs and incorporate conversions into your assessment.
Conversion rate tells you which ad and campaign clicks are generating the actions we want our target audience to take; otherwise known as Goal Conversions. Conversions are actions that have the real value to your business and conversion rates will give you a better understanding of what ads, audiences and landing pages are actually delivering the goods to meet and exceed your PPC goals.
So in PPC terms, what is a conversion? A conversion is typically a completed form or lead that is generated. So to determine the conversion rate for each campaign you: Leads or Goals ÷ Clicks
Typically, high conversion rates are generated by combining quality exposure to the right audiences with an ad that is relevant and compelling to the searcher. And even when the searcher reaches your page, you have the conversion elements that turn these visitors into leads.
Lastly, the practice also needs to place a relative financial value on the types of leads your campaigns generate. All leads are not the same and some of them possess significantly more revenue potential.
Cost Per Acquisition (CPA)
An overall measurement as to the effectiveness of your PPC campaign is the Cost Per Acquisition. CPA measures how much it costs to acquire a customer through your PPC campaign. For most practices this is a much more valuable metric to gauge your results and to make course corrections. And all this goes hand in hand with determining your ROI.
However, in most professional service businesses there are a number of variables that create a challenge when tying PPC campaigns to actual revenue.
- Telephone and other types of Goal Conversions need to be accurately tracked
- The time it takes to convert a lead into a signed up customer can be rather lengthy
- Certain types of services and customers convert at a different rate than others
- The point at which you receive payment can also drag on
- The amount of revenue generated by different services and customers varies greatly
Much of the data in that we address in this How-To article can be generated through your Google AdWords account. However, in order for revenue to be tied to specific campaigns, it may require more sophisticate CRM software than what Google AdWord tracking can provide. Also, the timeframe for assigning revenue to specific campaigns requires a practice to run the campaigns for quite a while without major changes for revenue to be incorporated.
For the vast majority of practices, tracking the types of leads and the costs to generate them are probably the most valuable metrics.