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Marketing Analytics: How to measure your PPC

March 27, 2013

Simon Fryer
Simon
Simon is CandidSky's Search Director, with strong roots in organic SEO and analytics, and a disturbing passion for spreadsheets.

Online marketing should start and end with analytics. Unlike traditional forms of advertising, every visitor, every action, and every penny spent can be accounted for and analysed.

This is the second of a 4-part series on how to measure your online marketing efforts. We’ll post up links to the latest articles as we release them.

  1. How to measure your SEO
  2. How to measure your PPC
  3. How to measure your blogging
  4. How to measure your social media marketing

How to measure your PPC

Measuring your paid search performance demands a completely different set of metrics to organic SEO. The biggest difference is that every time someone clicks your link from a search engine results page (SERP), you’re paying for it. It’s important to understand how much you’re paying per visitor, and what kind of profit paid advertising is generating for you. For the most part it’s a numbers game.

You’re going to need to understand 5 key metrics for paid search:

  • Click-through rate (CTR)
  • Average cost per click (CPC)
  • Conversion rate
  • Cost per acquisition (CPA)
  • Return on ad spend (ROAS)

Click-through rate (CTR)

“The percentage of people who saw your advert and that clicked a link.”

Click-through rates vary massively depending on the keyword in question and the industry it relates to. Improving your CTR won’t make your campaign more profitable, as you’ll be paying for the extra clicks you get, but it will increase the number of visitors clicking your ads rather than your competitors. You can increase your CTR by testing different advert headlines, and using ad extensions such as reviews or ratings. The positioning of your ad in the SERP will also impact CTR, so you want to make sure that your ads are appearing at the top of the page for your most important keywords.

Average cost per click (CPC)

“How much you’re paying for a click on a given search advert”

How much you should be paying per click will vary depending on a number of factors, most importantly the eventual conversion rate for each keyword. The placement of your ad in the SERP will depend for a large part on how much you’re paying. Keywords which have a high conversion rate will be worth more, so you’ll generally need to pay a higher CPC to appear at the top of the page. However, having a good quality score will allow you to appear higher on the page without having to pay as much per click, so it’s worth taking note of factors which can affect a quality score.

Conversion Rate

“The percentage of people who arrived on your site via a paid search ad who then completed the desired action (such are requesting contact or making a purchase)”

As with organic SEO, conversion rates are one of the most important metrics to track. They will determine the profitablity of your entire campaign. Low conversion rates mean your paying for visitors who aren’t buying anything!

Conversion rates are also a good indicator as to how well your PPC landing pages are performing, If the landing page content is highly relevant to the original PPC advert you should expect a higher conversion rate as you’re providing exactly what the searcher is looking for. There are also other factors to take in to account, such as the competitiveness and attractiveness of your offer.

Cost per acquisition (CPA)

“How much you are spending on PPC advertising to generate each conversion”

CPA is the result of all the factors I’ve already mentioned. It’s the top-level reporting that, as a business owner or PPC manager, you need to be keeping an eye on; the cost of generating a lead through paid search. If your average sale value is particularly low you need to monitor this regularly to ensure that your campaigns are profitable.

Improving your conversion rates whilst maintaining the same budget will make each conversion cheaper, as will lowering your CPC.

Return on ad spend (ROAS)

“ROAS measures the overall return on your PPC advertising investment, calculated by dividing your total PPC spend by the revenue generated from PPC conversions”

ROAS is how you determine whether or not your PPC strategy is working for you. Conversions generated through paid search are only valuable if the revenue you generate offsets the amount you’re spending to generate sales or leads. Any Questions?

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