Optimizing the Funnel: Ad KPI Examples

March 26, 2019

What are ad KPIs?

Ad KPIs—key performance indicators—are metrics specifically used to track and evaluate the success of advertising and digital marketing efforts. These KPIs are a subset of marketing KPIs, which help teams optimize campaign performance, manage strategies and budgets, prove value to the C-suite, and much more.

PPC managers rely on ad KPIs to ensure that their ads are reaching the right audience, enticing potential customers to take action, and ultimately delivering a successful return on investment for the business.

How do I choose the right ad KPIs?

When selecting ad KPIs, every company will have unique needs and goals to consider. For example, if your company’s focus is on increasing brand awareness, you’ll want to choose metrics to evaluate how ads are supporting that goal. On the other hand, if you’re progressing toward profitability, KPIs that help you understand your customer acquisition costs and ROI will be more impactful. Instead of just tracking everything you can track, focus your KPI selection on measuring progress towards your key objectives.

One important thing to consider when choosing ad KPIs is how your various ad channels compare with each other. Breaking out your KPIs by channel will help you see where you drive the best engagement, where you earn the most conversions, which channels ultimately produce the most (and/or highest) paying customers, and more.

Using Ad KPIs to Inform Marketing Strategies

As a marketer, you want to get the most bang for your buck as you use various methods to attract, convert, and retain customers. Employing ad KPIs and other marketing metrics when you create your marketing strategy can help you make data-driven decisions that deliver the right results. What the “right results” are will depend on company-wide objectives (as discussed above), but using data—including ad KPIs—to evaluate performance will keep your team on track.

While it’s important to know how your ad platforms compare, it’s also important to use data to see how other inbound marketing strategies perform against ads, such as email marketing or unpaid social media. Which channels produce the most leads? Which source can you attribute the most revenue to? Where are you getting the best ROI? Etc. Using data to answer these questions can help you divert budget and team time towards channels that are performing well and away from those that aren’t supporting your goals.

Using Ad KPIs to Optimize Inbound Marketing Efforts

What happens at the top of the funnel determines what everyone down the line has to work with. If your ads don’t bring in more leads, your sales team will have fewer opportunities to close deals, and the company will likely earn less revenue. Your goal is to bring a high volume of high-quality traffic into your funnel so that the rest of the marketing and sales teams will have more people to nurture and sell to. The thing is, you don’t know how well your funnel is performing unless you track each stage and conversion point.

When it comes to ads, there’s so much more to consider than just clicks. Impression share, click-through rate (CTR), conversion rate, costs—all of these KPIs provide insight into how your ads are performing, how much and what kind of traffic they’re attracting, and how well they’re doing their job of convincing potential customers to buy.

Ad KPIs can also help PPC managers stay aligned with the rest of the marketing team to ensure that ads, landing pages, content pieces, etc. are working together seamlessly. That’s why it’s so important for ads managers to be involved in and aware of funnel stages beyond clicks, so they can see the bigger picture of the customer journey.

Using Ad KPIs to Improve Marketing Campaign Performance

“Spray and pray” is rarely a successful marketing strategy. Generic ads made to generic audiences generally lead to mediocre results. On the other hand, the more you can tailor your advertising to a specific type of customer, the better your results will be. So how do you refine your strategy to target the right audience, use the most attention-grabbing imagery, or make the most compelling offer?

The answer comes from data—in fact, the same metrics that you would normally use to evaluate a campaign. The difference comes in segmenting your CTR, conversion rates, etc. by the variable you’re trying to test, whether it’s design, demographic, copy, or any other factor. Using this method, you can refine your campaigns to appeal to your ideal customer and address their unique needs.

As you track campaign performance data in near-real time, it’s easy to quickly spot problems and shut down or fix any campaigns that are failing. Remember, however, that it can take time to generate a statistically significant result, so be cautious about pulling the plug on a campaign or naming a winner in an A/B test too early.

Ad KPI Examples

Use these examples to create effective campaigns and build a strong inbound lead volume for your marketing and sales funnel. Keep in mind that your company’s needs are unique, and you may need to customize, add, or remove KPIs to your list to get the information and results you want. For a quick reference to these KPIs, download our Ad KPIs Cheat Sheet.

Impression Share

Impression share is technically the percentage of impressions that your ads received relative to the possible total searches for your ad.

The formula for calculating impression share is:

Impression share = Total number of impressions received / Total number of impressions you were eligible for

Why use impression share? 

Impression share gives you a sense of the competitive landscape—how many impressions did you earn vs. your competitors. As such, you can use this metric to better understand the potential of a campaign and how to scale it.

After the early stages of a campaign, track impression share to measure the success of your scaling strategy and inform your plan of action moving forward. Remember, as your impression share increases, your competitors’ shares decrease. That’s a win-win!

Click-Through Rate (CTR)

Click through rate, or CTR, is the ratio between the amount of clicks to your website versus the impressions you have received on your ad.

The formula for calculating click-through rate is: 

CTR = Clicks / Impressions

Why use click-through rate? 

Of those who saw your ad, how many were interested enough to take the next step and click? CTR helps you evaluate how effectively your ads to grab attention.

Benchmarks can help you get context of how well your ads are performing. However, because CTR can vary widely by platform and by industry, it’s important to take both of these factors into consideration. For example, while Facebook Ads has an average CTR across industries of 0.9%, industry-specific benchmarks range from 0.47% to 1.61%. Similarly, AdWords’ overall average CTR is 2%—much higher than Facebook Ads. But broken down by industry, AdWords CTRs can range from 0.39% to 6.05%.

Conversion Rate

Conversion rate is the ratio of conversions to interctions or engagements with your ad, such as clicks.

The formula for calculating ad converesion rate is: 

Conversion rate = Conversions / Interactions (such as Clicks)

Why use conversion rate? 

After clicking your ad, you want visitors to progress further down your sales funnel by converting—whether that’s downloading a piece of content, signing up for a webinar, or requesting a demo. Conversion rate tells you what portion of clickers took advantage of your next call-to-action.

Higher conversion rates indicate that your ad and subsequent landing page are in sync. If you have a high CTR but low conversion rate, it may be that your audience’s expectations aren’t being met after they click your ad. Ensure your design, messaging, and offers are consistent throughout your campaign to increase conversion rates.

Cost Per Click (CPC)

Cost per click, or CPC is the ratio between your campaign cost and the number of clicks your campaign, or ad, received.

The formula for calculating cost per click is: 

CPC = Campaign cost / # of clicks

Why use cost per click? 

Monitoring cost per click can help you understand the cost of your advertising efforts and manage your PPC budget more effectively. Learn more about how Google calculates CPC.

While you want to lower your CPC, keep in mind that a lower cost often results in lower quality leads. Use CPC alongside cost per acquisition to ensure that you’re attracting the right traffic to your site.

Cost Per Acquisition (CPA)

Cost per acquisition, or CPA, is the ratio between campaign cost or the number of sales.

The formula for calculating campaign cost is: 

CPA = Campaign cost / # of sales

Why use cost per acquistition? 

Clicking and converting are great steps along the customer journey, but if they don’t ultimately lead to a purchase, they’re just costing your business time and effort. Tracking CPA helps keep your focus on the end goal: making sales.

A lower CPA means better profit margins. It can also be used to reverse engineer your funnel and set performance goals by showing you how many potential clients you need to attract for every sale.

Quality Score

The quality score for an ad is provided by Google AdWords and can be addded as a column at the keyword level or view in the tool.

Why use quality score? 

To support good advertising that improves user experience, Google evaluates the quality and relevance of keywords and PPC ads on their platforms.

It’s simple: improve your ad quality, or pay more for your ads—Google uses quality score to determine the price you pay for clicks. A good quality score is between 7 and 10, while a bad quality score is 6 or lower.

Average Position

Your average position is provdied by Google AdWords and can be added as a column at any level or view in the tool.

Why use average position? 

This KPI tells you the average ranking or position of your ads in search results, and how often your ads beat out your competitors’.

While it is generally believed that a higher average position results in more clicks, conversions, and sales, there are compelling arguments for aiming to rank 2nd or 3rd, rather than 1st. Find out what works best for your business by comparing average position with impression share to determine which ranking translates to the most profit.

Return on Ad Spend (ROAS)

Your return on ad spend, or ROAS, is the ratio between the revenue attributed to PPC ads and the cost of those ads.

The formula for calculating return on ad spend is: 

ROAS = PPC Revenue / PPC Cost

Why use return on ad spend?

With PPC, you’re spending money to make money—return on ad spend tells you exactly how much you’re making for each dollar you spend on PPC.

A typical benchmark for ROAS is 3:1 or 4:1, although you may need to aim higher, depending on your company’s needs. The lower your profit margins, the higher ROAS you’ll need to obtain to be profitable.

Getting a Full-funnel View

Monitoring and optimizing ad spend is only the beginning of acheiving full-funnel visibility. To learn more about how you can use KPIs to optimize your entire funnel and build a true growth engine, check out our ebook Building a Growth Engine.

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