Like most forms of digital marketing, PPC comes packed with a passel of terms and metrics you need to know. PPC is a more intense challenge than other marketing, however, since it asks you to analyze data and take action fast.
With your PPC budget hanging in the balance, recognizing valuable PPC metrics is crucial.
PPC advertisers must be careful not to accidentally focus on “vanity metrics” that look good, but aren’t predictive of performance. Luckily, once you know which PPC metrics really matter, the whole issue is brought within the domain of data.
The most valuable PPC metrics to watch are:
Cost Per Click (CPC)
As a general rule, higher cost per click translates to lower profitability.
Research has shown this even turns out to be the case when the advertising is oriented to upmarket products and services that, at least on paper, should make up for higher ad spend.
In fact, even companies with products valued at thousands of dollars consistently found higher cost per click created lower ROI. For most advertisers, this seems counter-intuitive.
The cut-off point? ROI drops remarkably at $5.00 per click and beyond.
Keywords to be targeted in a PPC campaign are usually determined well in advance and may even be outside the scope of the advertiser’s day to day work. But, while “long tail keywords” are effective for organic SEO, the same does not hold true of PPC ROI.
Studies show the sweet spot for PPC keywords runs between 15 and 30 characters:
- Below 15 characters, the keyword is either not specific enough or has heavy competition.
- Above 30 characters, keywords are so specific that the users are unlikely to buy anything.
Click-Through Rate (CTR)
Common wisdom dictates that higher click-through leads to greater ROI, but this may be mistaken.
As a general rule, increasing your click-through rate reduces your conversion rate.
This is because a higher CTR often correlates with loose keyword targeting and bidding policies that bring in unwanted traffic. Users may think an ad matches their intent, but advertisers need to carefully calibrate their ads to reach the right audience with the right message.
Conversion Rate (CVR)
Conversions represent the ultimate goal of PPC, so it may seem strange this metric comes last.
The long and short of it is this: unless the other metrics have been optimized, your conversion rate – which depends on all of them – cannot soar. And unless your bidding and business fundamentals work, even campaigns with plenty of conversions could produce a net loss.
For most advertisers, PPC offers high risk and high reward. Focus on these four metrics and you can tilt that balance in your brand’s favor.