Without proper planning, you’ll end up wasting time and money.
Let’s review what you can track, what you should track, and what kind of results you should expect!
Tracking
One of the biggest concerns that new advertisers have with PPC is whether they’ll be able to track its results. They worry that they won’t know which leads or sales come from PPC, making budget-related strategic decision-making difficult. But if you’ve done any offline advertising, you’ll be shocked by how much better the tracking is with PPC than traditional marketing channels.
Customizable tracking options provide data on a seemingly endless number of conversion goals. While things like clicks, impressions, cost, and average ad position are reported automatically, other conversions like sales, signups, and phone calls can be set up as well.
Creating conversion goals is as easy as selecting a few options, letting the PPC platform generate a snippet of code, and then placing it on the right page. Rich conversion data will start pulling into your account shortly thereafter, and continue to do so indefinitely if the code remains in place.
Metrics
With the incredible breadth of data available, it’s sometimes overwhelming to determine which metrics are the most important to monitor. The specific combination of metrics you select as key performance indicators (KPIs) will depend on your unique goals. Commonly tracked metrics include:
- Click-Through-Rate (CTR)
CTR measures how many views of your ads turned into clicks on your ad. A higher CTR indicates that your ads are more compelling. Tightly focused ad groups are directly correlated with higher CTR as well, which means that you can use this metric to evaluate ad performance as well as organizational account structure. - Conversions
PPC is meant to drive conversions in the form of sales, downloads, trial signups, phone calls, or form submissions. Tracking these conversions is essential for determining how your paid search investments affect your bottom line. - Cost per Conversion
Knowing how much an individual conversion costs aids in calculating your return on ad spend (ROAS) at the product level. It also enables informed decision making when setting your bids. - Average Conversion Value
The average conversion value from your PPC efforts can vary, sometimes quite substantially, from your site-wide average order value (AOV). Understanding the relationship between these two figures will help you determine how lucrative paid search is for your business.
There are tons of metrics that you can use to analyze the health of your paid search efforts. Just remember that a single metric will never tell the whole story. Tracking multiple KPIs and understanding the relationship between them will paint a vivid, complete picture of your overall efforts.
Baselines
Knowing which metrics to track doesn’t mean much if you don’t have a baseline to use as a gauge. However, setting reference points across the board is a difficult task because there’s so much variation between industries. Therefore, these baselines should only be used as loose guidelines until you have industry and company-specific numbers to rely on.
- Click-Through-Rate (CTR)
CTRs should always be higher for conversion-driven campaigns than they would be for branding campaigns. Similarly, CTRs will be higher on the search network (where people are actively searching for the items that you have on your website) than they are on the display network (where ads are being passively shown to users based on their demographics or interests).
Generally, you should expect to see a CTR of at least 2% for conversion-focused ads on the search network, but at least 4% is preferred. Depending on the nature of your business or your offerings, it’s not unheard of to have CTRs of 10% or more for your top ad groups, or keywords.
Remember, it’s more important to evaluate CTRs against their counterparts within your own account than it is to compare them to “industry standards” or your competitors’ metrics. - Conversions
Analyzing your CTR is a great start because it will tell you how engaging your ads are, but getting the click is rarely the end goal. Conversion rates tell the real story of how your PPC efforts are affecting your sales revenue. It might start to sound like two is the magic number, but a conversion rate of around 2% is pretty typical for search ads, whereas display ads will typically have a conversion rate of less than half that number.
Conversion rates vary by not only industry and company, but also product categories and amongst the products themselves. It’s common to find that individual offerings within your account have substantially different conversion rates. These differences provide a framework for you to evaluate where you should be spending your budget. - Cost per Conversion
A viable cost per conversion needs to be lower than margin to ensure that ad spend investments are profitable. If you’re paying a third-party or marketing agency to manage your PPC efforts for you, allocate their management fees across all conversions and add it to the reported cost per conversion to get a true sense of how much a conversion is costing your business. Tracking PPC-related costs allows you to make strategic decisions regarding which product offerings to focus on to maximize profitability. - Average Conversion Value
Knowing the value of an average PPC conversion can help you determine whether paid search is more lucrative than other marketing channels. Comparing this figure to your average order value (AOV) will help you understand whether paid search orders are larger, smaller, or about the same size as orders coming in through other ways.
Typically, you would want to see an average conversion value that’s the same or higher than your AOV, but if it’s lower you’ll just want to ensure that it’s still profitable based on the associated costs.
Thank you for letting us share our industry insights with you! If you have any tracking-related questions or need help identifying and analyzing the right metrics for your PPC account, contact us. We’re happy to help!
Stay tuned for the final article in our “PPC for Beginners” blog series "Can PPC Replace SEO?"
Did you miss our earlier posts? Check them out here:
Kate Pierce is the owner of LionShark Digital Marketing LLC, a West Michigan internet marketing company. Her areas of expertise include Paid Search, Search Engine Optimization, Business Blogging and Web Copywriting. She lives in the Grand Rapids area with her husband and son and enjoys cooking, watching sports, and spending time together as a family. Like a true digital marketing expert (i.e. geek), she loves talking about current marketing trends… so don’t say you weren’t warned!