How to measure and analyze the ROI of your PPC campaigns
You have thought hard and finally realized that pay-per-click advertising is what your brand needs to succeed. Kudos to you! After all, PPC allows you to quickly evaluate your campaign’s performance and make alterations to maximize its potential. However, there’s a tiny problem with it all. How can you improve your PPC return on investment (ROI) without knowing what metrics to track? Have no fear; Digital Dot shall enlighten you. In this article, we’ll discuss several things. You should pay special attention to how ROI is calculated from the metrics. Soon enough, you will know everything to measure and analyze the ROI of your PPC campaigns effectively. And thanks to the data presented here, you can optimize your campaigns for ultimate success. So, let’s begin!
What is the role of ROI in pay-per-click advertising?
Chances are you have already heard of the term ”return on investment” (ROI). If you have done business in the finance industry, you are probably even quite familiar with it. But what does it have to do with digital marketing exactly? Or rather, what does it have to do with PPC advertising? Well, as you may know, there’s a financial component to PPC. After all, PPC campaigns rely on the premise of paying per click. That said, it’s only natural that ROI would directly impact their success. Or the lack thereof, for that matter.
While the premise of ROI is more or less the same in any business sphere, the way it is calculated slightly differs. The general formula, however, is as follows:
- ROI = (Profit – Costs) / Costs
Now, one may think that costs, in the PPC world, correspond to money spent for each click. But that isn’t quite right. Costs account for the total expenses of running the campaign and those related to, for example, NYC SEO company services, product production, and employee wages. Then, there are the costs of running a website, equipment, and utilities.
Simply put, to calculate the ROI of your PPC campaign, you’ll need to factor in the total costs that your business incurs. Not just the sum you pay for clicks.
Key metrics that can help you measure and analyze the ROI of your PPC campaigns
It’s normal to feel overwhelmed while calculating the PPC return on investment. Even the most seasoned marketers can waste a lot of time poring over a mountain of key performance indicators (KPIs) without ever getting to the bottom of how successful their ad campaign is. The good news is that you don’t need to track countless metrics to determine whether your ads generate enough profit. You’d be better off paying attention to only a few. Ones that are deemed particularly worthwhile by one of the best social media marketing services NYC providers.
#1 Click-through rate (CTR)
Click-through rate (CTR) is an indicator of how well your ad is behaving. It shows the number of people that have clicked on your ad only to be redirected to the desired page. CTR will probably be the first metric you observe after establishing your PPC campaign. You may even be tempted to proclaim your sponsored advertising campaign a success once the clicks arrive. But pause for a second because they aren’t clear indicators of success. Don’t get us wrong; they are fantastic and show your ad is effective. Still, what good are thousands of clicks if they bring you little to no customers?
#2 Conversion rate
And that brings us to the conversion rate, a metric used to measure and analyze the ROI of your PPC campaigns, which directly correlates to the CTR. Conversion rate shows the percentile of people who interact with your ad and take the intended action after clicking on it (filling out a form, making a purchase, etc.). It’s simple, really. The higher your conversion rate, the bigger your ROI.
#3 Cost per acquisition
The cost per acquisition (CPA), or cost per conversion, measures how much it costs to get one person to take a desired action. To paint a better picture, let’s say you spent $1,000 on a campaign. As a result of your efforts, 100 people made it through the entire sales funnel to the purchase. Naturally, you’ll need to divide your expenses by the number of converted individuals to calculate how much it costs to land one customer. In this particular example, your cost per acquisition is $10. Generally speaking, you should keep your CPA as low as possible. However, as no business is the same, what some consider the optimal CPA, others consider inadmissible. Several factors dictate the ideal CPA, including but not limited to how much value businesses place on a conversion.
#4 Quality Score
To guarantee that users see relevant ads and have a good experience, Google uses a metric called Quality Score to determine how relevant your keywords are. Your Quality Score is based on factors such as:
- CTR of the keyword and the ad in question
- Keyword and ad relevancy to user’s search
- The relevance of the keyword used to the ad it was used in
- Landing page quality
Google uses Quality Scores to influence ad placement and cost-per-click, so keeping them high is crucial. If your average Quality Score is poor, you may be skipping an essential step in the process, such as conducting thorough keyword research, organizing your campaigns, or optimizing your ad copy.
Keep tabs on data and use it to make adjustments
Running a campaign with Google AdWords, for instance, allows you to access a wealth of insightful ad-related information from the convenience of your dashboard. Information that you can then use to measure and analyze the ROI of your PPC campaigns and identify areas of improvement. For instance, your ad’s click-through rate (CTR) was decreasing. That would be a signal to make certain adjustments. Then, if your landing page isn’t converting leads into customers, that could indicate it’s time for a redesign. Still, if you aren’t sure how to optimize the collected data for the best results, you might as well find the best PPC agency in NYC to help evaluate your efforts. Or better yet, run the entire campaign for you — from start to finish!