As we ramp up for Unbounce’s upcoming PPC week, we thought we’d revisit some of our favorite PPC posts from the archives. This post was originally published in May 2015 but is as relevant as ever. Dig in!
If you’re anything like me, you’ve participated in a couple of DIY home improvement projects. At the beginning of these projects, with YouTube training videos as my sidekick, I have an irrational sense of confidence in my handyman abilities.
When I’m tracking down my supplies at the local hardware store, I often find the products priced and displayed as “good,” “better” and “best.”
The frugal side of me tries to argue that “good” is good enough, but is there something about the “best” product that will secure my DIY victory?
With PPC advertising, we often face the same dilemma; we need to decide which metrics are “best” to measure the success of our campaigns. There’s a wealth of content and opinions on how to measure PPC success, which can get confusing.
This post will help you understand how different metrics can paint very different pictures of PPC campaign performance.
I’ll show how traffic-focused metrics can be a good starting point, how conversion-focused metrics are even better and how ROI-focused metrics provide the most complete picture for making meaningful changes to your campaigns.
Let’s dig in.
Good PPC metrics are traffic-focused
Many advertisers will default to looking at the click-through rate or cost per click when determining the success of a campaign. AdWords provides a lot of traffic-focused metrics that are incredibly useful, including underused gems like device segmentation and impression share.
And while those are definitely a good start, it’s important not to get so distracted that you lose sight of your basic business goals: generating a profit.
My agency has serviced or audited over 1,000 AdWords accounts. Believe it or not, almost half of them had not set up conversion tracking.
Conversion tracking allows you to measure conversion actions like a purchase or a lead submission in your ad platform, usually by placing a code snippet on a thank you or order confirmation page.
Without that piece of code, the only metrics you can measure are related to traffic, such as search impressions, clicks and click-through rates. Let’s look at an example to see why this is problematic.
What traffic-focused metrics tell you
Imagine you’re a mortgage company and each new paying customer is worth on average $3,500 in revenue with 50% in gross margin.
If you haven’t set up conversion tracking, you’ll mostly end up looking at reports like this:
If we’re only looking at traffic-focused metrics, our top campaign seems to be Campaign 5, which has the most clicks, the best click-through rate and the lowest cost per click.
Meanwhile, Campaign 4 has expensive clicks – which looks like a red flag!
But the truth is this data alone can’t really tell us whether the campaigns are successful to a company’s bottom line. For our mortgage company, we need to know whether the clicks are actually translating into useful leads.
Better PPC metrics are conversion-focused
If you’re already using conversion tracking, pat yourself on the back: you’re better off than much of the competition.
If you’re not, then get conversion tracking set up immediately. It’s easy to set up on most platforms like Google AdWords and Bing Ads (and if you’re using Unbounce you can put the tracking code right on a built-in thank you page).
Think beyond web conversions
Conversion tracking is more than just web leads and sales: among new accounts I’ve audited or onboarded, I’ve found that approximately 75% of advertisers who take phone leads don’t track them as conversions.
For many industries, phone calls are the main source of leads, so it’s critical to include calls in your conversion tracking! Many call tracking platforms have built-in ways of setting this up, and Google has a solution for AdWords advertisers here.
Call leads are more valuable for some businesses than for others, so you’ll want to keep in mind that not all types of conversions are necessarily equal – but the first step is making sure everything is tracked and measured.
What conversion-focused metrics tell you
Let’s say our mortgage company joins the big leagues and sets up conversion and call tracking. Here’s how that report looks:
Now we can track how many people are actually signing up for the service, not just clicking our ads.
Now we can start identifying our top-performing campaigns using cost per lead data (cost per conversion in Google AdWords). You’ll notice that Campaign 5 has the best cost per conversion, so it still looks like our top performer. Campaign 4 still looks like trouble.
But while conversions are great, at the end of the day what really matters is whether leads became paying customers.
Conversions tell us how many leads our company got, but not how many actually signed up to refinance their homes or how much revenue they brought in.
Your PPC campaigns aren’t just about clicks. Don’t lose sight of what matters: generating a profit.
The best PPC metrics are ROI-focused
For marketers who want to use the most meaningful data, let’s move to the golden metric: actual ROI!
That means tracking leads from click to close and measuring revenue on a per-lead basis. When you understand which campaigns, ads and keywords are actually generating revenue, you’ll be way ahead of competitors who have no idea where they’re making or losing money.
What ROI-focused metrics tell you
Let’s say our mortgage company decides to figure out exactly which leads are earning revenue. We can track specific leads in our CRM back to each campaign, set up separate phone numbers for each campaign and record which calls led to sales.
Using our customer value numbers from above, we can calculate the following report:
We calculated revenue by having our CRM capture the Campaign ID in Google Analytics, then created unique phone numbers for every campaign so we could track every sale back to its source. Then we calculated the revenue value of every customer attributed to a PPC campaign.
Suddenly Campaign 4, which looked so bad before, is now our hero! Not only does it have the best ROI, it brings in the most revenue and the most sales — and that’s with the fewest conversions and second-fewest clicks.
Now we know something much more useful than cost per conversion — we know how valuable a conversion is. We know where to focus our marketing efforts to maximize revenue, and where we can make improvements that impact the bottom line.
We could then respond by allocating more budget to Campaigns 4 and 5.
Meanwhile, Campaign 3 gets a lot of traffic and conversions but has a poor ROI, so we can get to work at rewriting ads and landing pages to better qualify those leads.
Those are the kinds of changes that have meaningful results!
3 simple ways to track and measure your PPC ROI
The example above mirrors what we often see in the lead generation space: more expensive leads can often be the most qualified and produce the most revenue. But without breaking down campaign ROI you never know.
Costly PPC leads are often most qualified. Break down campaign ROI before you do anything drastic.
So how do you move beyond conversions and start focusing on ROI?
Here are a few simple ways to get started:
Every metric matters
PPC marketing leaders know that all the metrics we’ve discussed are valuable – they work to improve the three categories over time, while focusing most of their efforts on ROI to move their profitability in the right direction.
Traffic data like impressions, clicks and cost per click tell you how much search demand there is for your service and how many people are responding to your ads.
Better metrics like conversion data tell you how effective your ads and landing pages are at generating leads, as well as how much your leads cost.
But nothing tops actual ROI data: how much conversions are worth to your company’s bottom line. As we’ve seen, that kinda of data lets you focus on making changes where you can make the biggest difference!
At the end of the day, the key is to look at the right metrics for the right situations and use that data to make the most meaningful changes to your campaigns.