Last Updated on August 26, 2022
In PPC, the key performance indicator plays a fundamental role. They let you track the performance of your paid ads and improve them on the run.
KPIs, or Key Performance Indicators, are metrics that can be used to measure the output of something. In our world, we use them to measure the production of a marketing campaign, and if used correctly, they should provide a quick snapshot reflecting the campaign’s health.
Some businesses have a White Label Partnership that handles their white label PPC management service on their behalf. This could be an ideal solution for them. However, if you have the time and resources to manage your own campaigns and can afford the time it takes to set up and optimize your campaigns, taking control of your PPC KPIs is a good start.
Here are the 8 Most Important PPC KPIs to use.
Impressions are an essential key performance indicator (KPI) and part of a well-balanced performance marketing dashboard. But many PPC management companies and advertising agencies put too much focus on this typically massive number.
Whether we are promoting an eBook, or product, or furthering brand awareness, Vital always presents our impressions KPI in line with engagement rate (clicks) and conversions. The balance of PPC allows us to improve campaigns and inform further investments.
An impression is how often your ads are visible on search results pages or any PPC advertising platform.
While the impression metric may not be the most important key performance indicator for a successful campaign, it is essential to know which sites your ads are visible on. The success of a PPC campaign also depends on the number of impressions you get that lead to clicks and conversions.
Every conversion starts with a click. This key performance indicator measures how many people clicked on your ad. Although clicks are an early indicator of a PPC campaign’s success, you can’t base the success of a campaign only on this one indicator. Clicks are a great key performance indicator for that mid-month account performance checkup; however, the success of a campaign shouldn’t be determined solely by clicks.
3. Click-Through Rate (CTR)
The CTR is calculated by dividing the number of clicks in a reporting period by total impressions.
This is measured by: Total no. of clicks in a specific period (say a month)/ Total impression. For example, if your ad got 1000 impressions and was clicked 250 times, then your CTR would be: (250/1000) x100=25%.
These basic KPIs evaluate the performance of a campaign on any of the usual channels. The higher the percentage of clicks you get the greater the likelihood of generating more revenue.
Knowing what CTR is and how to measure it is key to being able to indicate your performance, but keep in mind that there are no perfect CTR campaign managers should be striving for. PPC performance varies by industry and several other campaign variables.
4. Cost Per Click (CPC)
CPC is a KPI model based entirely on the clicks that are made in the ad. The most recognized CPC system is Google AdWords, where advertisers suggest the price, they want to pay per click and can set multiple parameters for their campaign, from the daily maximum budget to the criteria under which the ad will appear. On the other hand, publications have the system of Google AdSense to be able to serve AdWords messages, thus taking a percentage of Pay Per Click (PPC).
The cost depends largely on how others (competitors) are bidding. CPC determines how much you have paid by the following equation:
CPC= Total campaign/ Total no. of clicks received
PPC advertisers know how much they can pay for an ad campaign because they typically have a predetermined budget. However, while they specify a budget and a bid when doing the setup of a PPC campaign, it doesn’t mean that this is what they will pay.Key Performance Indicators are metrics that can be used to measure the output of something. In our world, we use them to measure the output of a marketing campaign and if it is used correctly. Click To Tweet
5. Conversion Rate (CVR)
PPC marketers are typically hired for a lot of reasons but at the core, it’s always related to the Conversion Rate. To calculate the conversion rate, you first need to understand what the term “conversion” means in your industry. If you are investing in outside PPC services, it is important to choose an agency that understands your industry and that can tailor its PPC tactics to your specific business needs.
The conversion rate is one of the most significant digital marketing metrics you should track. In Google Ads, you can calculate the conversion rate: CVR= (number of conversions/total no. of clicks) x 100. So, if you have 20 conversions and 200 clicks, your CVR is: (20/200) x100= 10%.
In Google Ads, you can now target CPA conversions based upon CPA goals- rather than concentrating on clicks or impressions. As Google machine learning will need a bit of data before it can perform this rather complex bidding strategy, a minimum of 15 conversions must have occurred on your account within the last 30 days.
6. Cost Per Action
The CPA, Cost per Action or Cost per Acquisition, goes beyond a simple click, since it also requires a certain action on the part of the user when it reaches the page of the advertiser, whether they subscribe to a list, or downloads software, purchases a product, etc. In this model, the advertiser only pays when this action occurs, although the CPA usually has a higher cost that can amount to several tens of dollars.
CPA is defined by Google as the price you pay for each new customer you acquire. CPA KPI is based on your quality score.
If you want to manually check: CPA = Total conversion costs/ total conversions that happened. CPA is relatively easy to calculate. However, advertisers can also calculate targeted CPA.
Targeted CPA: a bidding technique that advertisers apply when creating the campaign. It helps to set bids that will automatically trigger conversions (As many as possible based on the CPA budget). What you need to do this are:
- Understand various bidding techniques
- Setup conversion tracking
- Have round (minimum) 30 conversions in the last 30 days.
7. Quality Score
The quality score metric determines the quality and relevancy of your ad content. Your quality score will depend on several factors including past performance, CTR history, landing page experience, keyword relevance, and ad content relevancy.
While clicks and CTR can be easily measured, quality score is a little harder to get right. You can’t measure it yourself, as it is a metric defined by Google. However, the search giant provides some information on the factors that affect it, namely: landing page experience, ad format, ad relevance, and expected CTR.
The algorithm behind Quality Scores is something of a black box, but it generally depends on three factors:
- Ad relevance
- Quality of landing page
- Possible click-through rate (CTR)
Each factor can be analyzed and improved by your PPC partner, especially if they are directly involved in landing page design. Tools like dynamic text replacement and tactics like geographic specificity can also help with increasing Quality scores.
8. Lifetime Value
Lifetime value is the total profit or spending that is expected across the entire relationship with a customer. Regarding PPC, this is used to evaluate and compare the CLV of a PPC acquired customer with other channels. This can help you with understanding the quality of customers coming in from PPC campaigns.
For example, you can compare the duration of time that customers stay subscribed to the service the company provides, before and after the PPC campaign. For other businesses, measuring the profit margin per customer is also useful.
Lifetime VALUE (LTV) is a prediction of the net profit associated with a single customer for the duration of your relationship. In other words, how much does one buyer spend with you before leaving and never coming back?
Written By: Kennie G.