Online advertising is extremely effective. It’s relatively cheap, quick to deploy, and easy to reach the right audience. Above all, results are measurable and allow marketers to optimize and improve the effectiveness of their campaigns.
To maximize results, it’s important to look at the right Key Performance Indicators. KPIs show results and effectiveness. That’s why choosing the right KPI is one of the most important factors when creating or optimizing marketing channels and advertising campaigns. The best KPIs are the one that represent real-life business results as closely as possible.
Unfortunately, many organizations choose the wrong KPI…
Ask a business(wo)man what he wants to achieve with his campaign and the answer will often be: “More visitors to my website!”. Of course it’s great when a campaign brings in thousands of visitors daily, but if these visitors don’t lead to additional revenue, it’s a waste of precious time and marketing budget.
To help choosing the right KPI, I’d like to provide you with a list of common KPIs:
- CPM (Cost Per Mille)
- Non-bounce visits
- CPL (Cost Per Lead)
- CPA (Cost Per Action)
- CPP (Cost Per Phone call)
- ROAS (Return On Advertising Spend)
- ROI (Return On Investment)
- VLV (Visitor Lifetime Value)
- PVV (Per Visit Value)
- CPPV (Cost Per PageView)
The right KPI might considerably increase your marketing results!
Common Key Performance Indicators:
The KPI of the 20th century. Or Medieval Times, if we look at all the metrics that online advertising offers today. CPM stands for the cost of showing an advertisement 1,000 times.
Some agencies use CPM as a KPI to show the reach of branding campaigns. Others use it to gain exposure, without having to pay for expensive clicks. Unfortunately, these strategies often fail. Because an advertising network makes relatively less money with CPM bidding, it shows advertisements on low positions (often under the fold, where it’s less visible), or on pages that many organizations don’t want to be associated with. Few companies sell products or services on websites concerning dating, torrents, or medical enhancement products. This makes the amount of impressions and therefore CPM a bad metric to measure the effect of a campaign.
If we compare CPM with the Dark Ages, clicks can be compared to the Age of Enlightenment. The amount of clicks says a lot, if not everything, about the amount of visits to a website. However, it doesn’t say anything about quality. An example:
Company XYZ sells iPads and has initiated an AdWords campaign, and bids on the broad match search phrase “buy ipad”. This ensures that ads are shown to people searching for “buy new ipad”, but also to people searching for “buy ipad games”. XYZ uses the amount of clicks as a KPI, striving to get as many clicks from their budget. However, competition and lowering click prices causes ads to be shown less and less on the lucrative “buy new ipad”, and more on “buy ipad games”, although these visitors are much less likely to buy an iPad.
Increasing the amount of visitors to a website should never be the goal of a campaign. The combination of volume and quality determines the effectiveness of your website traffic.
Now we’re getting somewhere. This is still a very soft KPI, but the first metric that focuses on interaction. A “bounce” is a visitor to a website who only visits one page. A “non-bounce” is someone who visits two or more pages on a website. This implies that the visitor has not clicked on an advertisement by accident, and is genuinely interested in the product or service. This can be a good KPI if there’s not much data available.
This KPI provides insight into real results. It shows the efficiency of (part of a) campaign by calculating the average costs for each new lead. A lead a request for a quote, a call to the sales team, or a form to download a white paper.
This KPI is very similar to the cost-Per-Lead, although an Action is not limited to the generation of a lead. Some examples:
- Purchase of a product
- Subscribing to a newsletter
- Downloading a white paper
- Visiting a contact page
- Downloading demo software
- Sharing on Facebook or Google+
Defining multiple Actions and using CPA as a KPI is ideal for organizations with a fractured buying process. Measure the contact moments throughout the process and split up the total conversion value across the KPI’s, depending on how much they attribute. This will give a complete overview of each medium’s effectiveness.
For example: a software company provides complex B2B solutions, with a major organizational impact. Their clients have a long time-to-purchase, with many stakeholders. This makes it unrealistic, if not impossible to contribute all sales to the first referral. Identifying each individual contact point as a conversion, and awarding it with a custom value, will deliver a detailed image of conversion attribution and each campaign’s effectiveness.
An example of the conversions in such a process:
- New, high-quality visitor to the website (visited 3+ pages, value:$1)
- Download of a white paper (value: $3)
- Sent contact form (value: $12)
- Phone call to sales department (value: $87)
- Login demo environment (value: $30)
- Sent online intake form (value: $180)
- Download of a proposal (value: $1,220)
The ROI from any campaign, medium or channel can be determined by dividing the total conversion value through the total amount of costs.
CPP (Cost Per Phone Call)
This is another form of CPA, measuring the amount of phone calls to a call centre or Sales Department. These are very valuable leads, that unfortunately aren’t always being measured.Tip: always combine a CPP with a minimum length for a phone call, to avoid measuring low quality calls or calls from bots.
More advanced KPIs
The following online marketing KPIs are a bit more advanced, but are surely worth the trouble for many websites:
ROAS (Return On Advertising Spend, gross or net):
E-commerce web sites usually measure ROAS: the amount of revenue (gross or net), divide by advertising cost. Non-ecommerce web sites with a site integrated in the CRM can often use the closing rate to leads instead.
ROAS shows organizations insight into the return of their advertising activities. This allows them to shift budget from underperforming campaigns to the ones that perform best, or to new advertising initiatives. This ensures the highest amount possible return on advertising budgets. Modern content management systems (such as Magento, WordPress, Joomla or Drupal) come with out-of-the-box opportunities to integrate such ROAS-data into their web analytics programs.
ROI (gross or net)
Managing campaigns by ROI is very similar as ROAS, with the exception that revenue is divided by the total amount of investments, including (but not limited to) advertising cost, human capital, consultancy fees, licenses, creative and content production, et cetera. This is especially important when measuring the ROI of marketing channels without advertising costs, such as SEO, non-paid social media, and press and PR.
VLV (Visitor Lifetime Value)
This is especially important when new customers are likely to perform multiple purchases in the future. If you would only consider the value of the very first transaction, you might miss out on valuable secondary purchases and limit the perceived value of both customers and campaigns. More insight into the Visitor Lifetime Value will help you to find new customers who will generate a higher return over time.
PVV (Per Visit Value)
This marketing KPI deals with the average value per visit. This works especially well for campaigns where the average cost for a visit should never be higher than the return. This way the campaign will at least break even and have maximum coverage. This KPI is often used with aggressive campaigns to increase market share, or strengthen an organisation’s brand.
CPPV is often used for web sites, blogs, or fora with a business model based on advertising income, a these usually enter around CPM. The more pages a visitor sees, the more advertisements can be shown, and the more revenue can be generated.
Another form of CPA, where advertisers look a the amount of shares within social networks. This can be a part of a social media campaign, or a tactic to gather back links for SEO.
Create your own KPI!
There’s many more marketing KPIs besides the ones listed above, measuring hundreds of other metrics within online marketing. Feel free to combine KPIs, such as:
New visitor + Purchase = New customer!
The opportunities are endless. Would you like to know more about online marketing KPIs? And learn which ones fit best with your organization? So you can increase sales and cut down on advertising cost? Then give me a call - I’ll be happy to help!
For more about online marketing KPI’s, read this excellent article on online business KPIs from Avinash Kaushik, Google’s leading web analytics specialist.