A KPI, or Key Performance Indicator, is a quantitative value that reflects a company’s ability to meet its business goals. KPIs assist you in determining your company’s financial, strategic, and operational success, as well as estimating your market position.
In PPC, or Pay-Per-Click, KPI works a little differently. Advertisers can, however, utilize KPIs to assess the success of their efforts. Furthermore, KPI will enable you to set up Google Ads and Google Analytics before the campaign even starts.
In PPC, conversion begins with a single click. As a result, clicks are the first sign of a successful PPC campaign. Clicks are a KPI that shows how many people have clicked on your ad. Advertisers frequently track clicks over the course of a month in order to halt ads that aren’t doing well.
The number of clicks is a good early measure of a campaign’s success. If a large number of individuals click on your ad, you know the message is getting through and driving traffic to your website.
While clicks are an important KPI, they shouldn’t be the only one you monitor. Unless your goal is simply brand awareness and authority, most organizations’ ultimate goal is conversions. A click does not always imply that the consumer has completed the buyer’s journey. To really understand the efficacy of your PPC campaign, you should track many KPIs.
Quality Score is the most elusive KPI for PPC advertisers. The statistic was devised by Google to determine the relevancy of ad material. Understanding KPIs is a little more difficult because they aren’t as simple as counting clicks.
The Google Quality Score is a metric that determines how effective your ad is. A quality ad, according to Google, is:
- Rate of expected click-through
- Relevance of the advertisement
- Experience with landing pages
The greater you’re Google Quality Score, the better the user experience you provide.
Ads are rated on a scale of one to 10, with one being the lowest and ten being the highest. Google gives you savings on your PPC campaigns if your ads are of excellent quality (7/10 or higher). You’ll pay more if your Quality Score is poor (6/10 or less).
Aside from the cost reductions, Google Quality Score is an important KPI to monitor because it assures that your advertisements are performing at their best. You can accept Google’s word for it if it says you’re doing a good job.
The click-through rate (CTR) is another important metric for evaluating the success of a PPC campaign. Instead of focusing just on the number of clicks, CTR compares the overall number of clicks to the number of people that saw your ad.
(Click Through Rate) CTR
CTR is calculated by dividing the total number of clicks by the total number of impressions (people who saw your ad whether they clicked or not). Your CTR would be 10% if you received 2,000 impressions and 200 clicks, for example. The click-through rate is useful since it puts the amount of clicks into context.
Although there is no such thing as a “perfect” click-through rate, there are resources that provide proposed benchmarks. They differ depending on the industry and other factors.
The travel business, for example, has a CTR of 4.68 percent, whereas technology advertising have a CTR of 2.09 percent.
Over time, keep an eye on your average CTR. Enhance your adverts on a regular basis to see if you can improve your CTR. The higher the number, the better!
Cost per click (CPC)
Because it works hand-in-hand with clicks and CTR, cost per click (CPC) is a significant PPC key performance indicator to measure. It’s a metric that calculates how much you pay for each user that clicks on your ad (as the name might suggest).
CPC can be used to figure out how much money you’ve spent on an ad campaign. Simply divide the total cost of the campaign by the number of clicks received to determine the cost of each click.
This KPI assists you in sticking to your budget. If your CPC starts to rise too quickly, the ad campaign may not be worth it.
Several factors influence your cost per click, including keyword popularity, Google Quality Score, and bid competition.
Cost Per Conversion (CPC)
The cost per conversion is a measure that determines how much it costs a Web advertising to acquire each actual client that makes a purchase. The price includes all traffic for the duration of a campaign, as well as conversion tracking. To make CPC calculations easier, advertising agencies often offer “traffic packages,” in which the person paying for the advertisement receives a set number of views or a set time frame for a set price.
The formula for calculating the cost per conversion is simple: the total cost of generating traffic divided by the number of conversions.
Conversion Rate or (CRV)
The conversion rate would be the “most important” PPC KPI to monitor. The entire reason you run sponsored search advertisements is for the conversion rate (CVR). It’s the number of people who saw your ad, clicked on it, followed your call to action (CTA), and made a purchase as a result of their actions. The conversion rate is a metric used to assess the success of a marketing effort.
CVR is calculated by dividing the total number of clicks by the number of conversions received from a campaign. For instance, if you received 200 clicks and 10 conversions, your CVR would be 10/200, or 5%.
You might be asking why bother with the others if CVR is the most crucial KPI to watch. This is due to the fact that a variety of circumstances influences CVR. Every facet of your PPC campaign, from keywords and ad copy to landing page design and CTA, can affect your conversion rates. Other KPIs can assist you in determining where you need to make improvements to improve your conversion rates.
Impression Share (CPM)
The number of impressions generated by a campaign isn’t a good predictor of success because it doesn’t indicate how many people thought your ad to be effective.
However, by stating how percent of your ad campaigns’ overall impressions, impression share adds context to the reporting tale.
Google states this number is calculated by dividing the total number of impressions your campaign received by the total number of impressions your campaign was eligible for:
Marketers can gain indirect competitive data via impression share. Knowing that you hold 50% of the impression share for a keyword indicates that your competitors own the remaining 50%.
When you improve your impression share, you reduce the number of times your competitors’ ads are displayed. You’ll need to boost your bids and/or budgets if you want to increase your impression share.
For practically every search query made, Google balances paid and organic search results.
Ads on Google or Bing may appear in position 1 at the top of the search engine results page (SERP), followed by position 2 and so on.
Advertisers can find out which place their ad appears in most of the time by looking at the average position. Because Google can’t always offer the highest bidder the top spot, they use ad rank to calculate middle position.
Quality Score is multiplied by an advertiser’s maximum expenditure per impression to determine ad rank (CPM).
However, because the average position is only that, knowing how to calculate it doesn’t tell the whole story because if your average position was 3, you could have been in positions 1, 4, and 6 earlier in the day.
For whatever reason, certain advertisers may have more conversions in position 4 than in position 1. Average position should be used to offer context for campaigns and campaign reporting, but not as a target indicator.
Attainment of the Budget
Paid search marketers are always given a monthly budget to work with when running ad campaigns. Budget attainment refers to how near an agency or individual comes to meeting their budget goals.
Despite how much information it gives on how campaigns are managed, most PPC marketers don’t use budget achievement when analyzing their PPC performance.
Because it’s tough to bid consistently and maximize results with continual swings in the PPC auction — a chore that necessitates ongoing oversight and adjustment – marketers tend to overspend or underspend their budget every month (without the use of machine learning).
LTV is a wide indicator of account health and a PPC marketer’s abilities. However, determining the client lifetime value for paid search is a difficult task.
Companies that keep consumers gained through paid search for a longer period of time generate much more money.
While PPC marketers are unlikely to tackle sophisticated LTV calculations like Starbucks, understanding how this KPI is tracked in other departments could be beneficial. Keep in mind that while LTV may imply something different to different marketers, it is the same for all.
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