According to the non-profit Project Management Institute, the top 10% of all organizations use a greater variety of metrics, and measure performance more frequently, than lower-performing organizations.
So, innovative, effective KPI choice is critical. It doesn’t merely enable accurate performance measurement. It’s also correlated with performance success.
KPIs—or, “key performance indicators”—are the metrics that measure the impact of a marketing campaign’s performance. The sheer number of KPI options can be daunting.
Fortunately, a PPC management agency can empower organizations like yours to create successful digital marketing campaigns. As part of a PPC marketing project, a management agency can help you choose the right metrics.
But what does the process of establishing performance metrics look like? And, how can you make sure your brand is choosing the right options? Discover the KPI establishment process in this comprehensive guide.
What Can a PPC Management Agency Do For You?
A PPC management company works with clients to develop and execute paid advertising campaigns. “PPC” is an acronym for “pay per click.”
Pay-per-click advertising is a specific type of online advertiser. A brand runs an ad on a social media platform or search engine, like Google. But, the brand only needs to pay when people click on the ad.
PPC management services help brands create and run marketing campaigns that center these kinds of digital ads.
There are a wide array of ad formats and targeting strategies a brand might choose for a PPC campaign. Banner ads, YouTube pre-roll ads, and paid search results all use a PPC model.
Why is Choosing the Right KPIs Critical For a PPC Campaign?
The right KPIs help you evaluate a campaign through multiple lenses. This lets you build an accurate model of the effect different choices have on your brand—both directly and indirectly.
You want to understand how a campaign is affecting both short-term gains and your ability to reach long-term goals.
Gimmicky tactics might get a lot of users to click on your ad, for example. But if the ad is misleading, users won’t become customers. Instead, they’ll develop a negative impression of your brand.
You want metrics that tell you which marketing choices are both generating leads and developing long-term customer loyalty.
How Can You Set the Right Metrics With a PPC Management Company?
The best way to choose the right KPIs is to work through a nine-step process. Work with your Google Ads agency in this process, so they can use their expertise to clarify any confusion.
An expert agent can also streamline the process, so you can better understand how each step applies to your brand, and your campaign.
1. Learn About KPI Categories, Typical Use
Most KPIs fall into one of three measurement categories. They might measure online traffic—how many people are seeing your campaign? Who are they? How many are engaging with it?
They can also measure conversion. How many people are doing the action you want them to—whether that’s signing up for an email list, or purchasing a product from your eCommerce store?
And, finally, some metrics measure the campaign’s impact on your bottom line. When choosing KPIs, you’ll probably want at least a few in each category: lead generation, conversion, and revenue.
In the first step, learn about the most popular KPIs in each category. This guide presents a brief overview, but it’s wise to go over the options in more detail with your agent.
Lead generation brings attention to your brand. Ideally, you’ll want to get attention from the people who are most likely to want to buy what you’re selling. These people are your target audience.
Lead generation strategies get your message in front of as many people in your target audience as possible. There are five widely-used KPIs that measure the success of lead generation in marketing.
Quality Score (Ad Rank)
Your Quality Score tells you how relevant your ads are to the users who see them (as compared to other ads those users see). Your ad’s relevance, your landing page’s relevance, and your CTR all contribute to your QS.
Quality Score is a great metric if you’re looking for opportunities for performance improvement. If your ad is target the right users, but they’re not into it, you need to optimize your messaging for that audience.
Moreover, Google offers advanced ad features to brands with a high Quality Score. It also displays the ad more frequently than low QS ads.
Cost Per Lead (CPL)
Cost per lead is a KPI that measures how much it’s costing you, on average, to earn each lead. It’s similar to cost per acquisition, or CPA.
To determine CPL, divide the cost of your campaign among the number of leads in a given timeframe.
Define leads in a way that makes sense for your goals. A lead might be each person who signs up for your email newsletter. Or, it could be every student who enrolls in your class.
Impressions is a KPI that tells you how many people have seen your ad. Every time your ad is displayed, it counts as one impression.
Improving your ad’s QS can increase your total number of impressions.
Lost Impression Share (IS)
Loss metrics are particularly useful during PPC campaigns. If Google, Facebook, or Amazon give your ads a low Quality Score, the platform will serve your ads less frequently. This reduces your impression share.
Lost impression share tells you what percentage of potential impressions your ad lost due to low ad rank.
Brand lift tells you about your ads’ impact on how people perceive your brand. You can determine brand lift through a brand lift study. You can also measure brand lift using a free tool through Google Ads.
Both studies and measurement tools use surveys of target audiences to discover how your ad affected your audience’s awareness or perception of your brand.
Studies survey users in two groups: those who saw your ad, and those who didn’t. The studies track the difference in brand recall and positive or negative impressions between the two groups.
Audience engagement characterizes the active experience audiences have with your brand. Engagement can include following a brand on social media, liking, sharing, responding to content, or signing up for free trials.
Research shows that engaged audiences experience the content more intensively. Engagement also drives customer loyalty. Measure audience engagement by tracking:
- Time on-page
- Bounce rate
- Unique visitors
- Repeat visitors
- Social media engagement
Customer Lifetime Value (CLV)
CLV is an evidence-based prediction. It shows you how much net profit your business can expect to earn from a customer in a given demographic or loyalty category, for the duration of their relationship with your business.
To estimate a customer’s CLV, you need to track each customer throughout their journey. Add up the value they offer at each touchpoint.
One way to estimate a customer’s CLV accurately is to track other customer relationship metrics. These include:
- Net promoter score (NPS)—how often do customers recommend your product to others?
- Repurchase rate (CRR)—how frequently do customers buy from you in a given year?
- Attrition rate (CAR)—at what rate do customers end their subscriptions or switch to competitors?
Conversion metrics show you how effective different messaging and targeting tactics in your campaign are. Of all the people who see your ads, how many go on to become customers?
Conversion metrics can be categorized by different stages of the campaign.
Click Rate (CTR)
The click-through rate, or CTR, shows you the percentage of users who click on your ad once they see it. When you run video ads, view-through rate (VTR) and completion rate are also relevant.
If people are viewing your video ads, but not responding to your calls to action, you have a different problem than an advertiser whose videos are all being skipped.
The conversion rate shows you how many people that view your ads either become customers or progress on their customer journey.
Conversion rate looks at the frequency of an action—typically, making a purchase or signing up for a mailing list. To calculate conversion rates, take the sum of all conversion actions, and divide it by the number of impressions.
Revenue is straightforward. Revenue-oriented metrics tell you the impact your PPC campaign has on your bottom line. This lets you determine which aspects of your PPC campaign generated revenue, and at what cost.
Revenue-oriented metrics also let you isolate the effect of your PPC campaign from the effects of other variables.
To calculate sales lift, add up the total sales of your products or services during the campaign’s duration. Then, subtract the typical (baseline) sales revenue over the same time period from that sum. The difference is your sales lift.
It’s wise to look at sales lift during each phase of a campaign. This can show you which campaign strategies boost sales most effectively.
Incremental Cost Effectiveness (ICER)
Businesses determine cost efficacy with a cost-efficacy analysis (CEA). CEAs compare the relative costs and outcomes of different choices.
Unlike other revenue-oriented metrics, ICER doesn’t strictly track dollars spent vs dollars earned. Instead, ICER is a metric that attempts to quantify the value of qualitative outcomes.
The results of a CEA are expressed as a ratio. The numerator (the first number in the ratio) denotes costs, while the denominator denotes outcome value.
The denominator is expressed in units that quantify a specific qualitative outcome. For instance, a CEA comparing health interventions may choose “quality-adjusted life years,” or QALY, as the denominator value’s unit.
Some organizations, like the CDC, use formulae to convert qualitative units to dollars. Yet, ICER is a useful metric even without this conversion.
To calculate ICER, choose some quality metric—let’s say units of Very Satisfied Customers. You want to measure the impact of a customer support intervention.
Without the intervention, only 5 out of 20 customers are Very Satisfied with customer service. Typically, you spend $20 per customer.
But, with the intervention, 12 of your 20 customers are Very Satisfied. The intervention costs $37.50 per customer.
To determine ICER, set the intervention’s cost in the numerator position. Then subtract typical costs without intervention. In the denominator position, set the value of the intervention. Then, subtract the typical values.
Your equation should look like this:
(750-400)/(12-5) = 350/7 = 50
Your ICER indicates each additional Very Satisfied customer costs you $50.
Once you have ICER, you can determine whether the expenditure is worthwhile.
Do Very Satisfied customers have a customer lifetime value (CLV) of at least $50 more than unsatisfied customers? Then the intervention is worth it. If not, you’ll need a less costly intervention.
Return on Investment (ROI)
ROI shows you to what extent your investment in your marketing strategies has paid off. To calculate ROI, add up the net profit (or losses) generated during the campaign. Then, total all expenses inherent to your campaign.
Take the total profit, then divide it by the sum of your expenses. This is a good, big-picture metric.
Return on Ad Spend (ROAS)
ROAS is similar to ROI, but its focus is more specific. Instead of dividing your net profit by the total campaign cost, you only divide it by the costs spent on ads.
This can distinguish differences between the value you’re getting from ads directly, and the value of other campaign costs.
2. Clarify Your Goals
What are your business goals with this PPC campaign? To clarify your goals, use the acronym “S.M.A.R.T.” Make your goals specific, measurable, actionable, realistic, and time-bound.
One way to get specific in your campaign goals is to audit your audience segments and your brand’s digital footprint.
Your digital footprint is made up of your online channels. All brands have six potential channels they can optimize to initiate and sustain marketing efforts. Your strategic channels are:
- Owned media (SEO)
- Website content
- Blog posts
- Targeted landing pages
- Social media
- Business profiles
- Public profiles and directories
- Earned media coverage
- Paid advertising
- PPC advertising
- Traditional advertising
- eCommerce store
Your campaign can drive qualified leads directly to your online store. Or, it can push leads to your strongest content, to nurture them further. Which goals are realistic? It depends on your business and industry.
3. Develop S.M.A.R.T. Goals For Each Channel
While some KPIs are relevant to the campaign as a whole, others are better suited to measure your progress toward micro-goals. Micro-goals are sub-goals that, when you accomplish them, you’re closer to your overall goals.
In the context of your campaign, think through your marketing channels. Develop S.M.A.R.T goals for each channel in your strategy.
Choose the KPIs best suited to tracking progress toward each goal. These are KPIs that can be checked frequently, throughout the campaign.
Measure Relative Difference
As you measure your progress, it’s smart to establish regular checks of relative difference among tactics. Relative difference demonstrates a change in your results, per KPI, as you change one variable.
So, for instance, you want to track the CTR of the campaign as a whole. But, you also want to track any increases or decreases in CTR when you change message copy, or if you target different keywords.
You can also measure relative difference if you run A/B tests during your campaign.
4. Use Your Customer’s Journey to Develop Your Marketing Strategy
Some performance metrics will become useful as you develop your marketing strategy. The best marketing strategy encompasses a PPC campaign, but it also works beyond it.
To develop an effective strategy, consider your customers’ journies. Use the “RACE” acronym to break each customer’s journey into four phases. Then, develop a marketing strategy optimized for each phase.
Each phase requires the right KPIs to ensure your optimization tactics are on track.
Reach (Lead Generation)
Lead generation is at the top of your marketing funnel.
This phase is particularly crucial for B2B businesses. One prominent study found that when a business considers making a purchase, its buyers spend 45% of their customer journeys conducting independent research.
Effective lead generation ensures favorable content about your business comes up first and foremost in their research.
This might be content you’ve created, which you can draw researchers towards with paid search ads. Or, it might be positive reviews or media coverage, which you can also draw people to with effective advertising tactics.
Before you even start, use CLV estimates to target leads with the highest potential lifetime value. KPIs like impressions, CTR, QS, and conversions are useful to measure the success of this phase.
Act (Lead Nurturing)
Actions are steps leads take that make them more likely to become customers.
This can include signing up for webinars or sales demos, downloading white papers or brochures, or following your brand on social media to evaluate your thought leadership.
In the study cited above, business buyers often use this stage of their customer journies to come to a consensus among internal stakeholders and partners. This consensus-building comprises 33% of a buyer’s journey.
To facilitate these actions, create a lead nurturing phase of your marketing plan. This can guide potential customers to persuasive content that demonstrates your product’s value.
Conversions are a great KPI for this phase. This is also a good time to start evaluating brand lift and audience engagement among your target segments.
Convert (Sales Pitch)
Once you’ve nurtured leads, it’s time to convert them into customers. Business buyers only spend 17% of their journies communicating directly with vendors or sales agents. You don’t have much time, so make it count.
At this stage, selective retargeting can be useful.
One way to optimize the impact of your retargeted ad is to A/B test different messaging and targeting variables throughout your campaign. To compare the results of these A/B tests, use comparative KPIs, like ICER.
Use the messages and targeting tactics that have demonstrated the most value for the money so far. QS is also a critical KPI at this stage, as you want to make sure your retargeting message is actually served to your leads.
Engage (Develop Customer Loyalty)
Once the lead makes a purchase, your customer relationship begins. Cultivate the customer relationship and develop brand loyalty.
KPIs like CLV and customer retention rate (CRR) show you how relationship development is progressing. Other useful measurements of customer loyalty in this phase include:
- Active user rate
5. Evaluate KPIs Before, Throughout Campaign
While the previous steps offer good, general recommendations, research is still critical. The best KPIs will differ depending on:
- Your business
- Your budget
- Your industry
- The market for your product
Context-specific research can help you evaluate KPIs before you launch your campaign. It can also help you discern when to implement new KPIs as the campaign runs its course.
Historical data specific to your market and your business is crucial. It will help you accurately predict costs and demand, to effectively utilize cost-oriented KPIs.
Metrics like CPL, ROI, and ROAS are easier to measure with when you have reasonable, budget-driven cost expectations.
And, metrics like sales lift and brand lift are only useful if you establish a baseline. Records of your business’s historical sales and brand rating enable you to start from an accurate baseline.
Industry research can tell you a bit about which metrics matter most in the long run for companies in your industry.
For instance, CLV is more critical for companies that sell subscription products. Ensuring customers don’t cancel subscriptions is a high priority.
In contrast, a fast food company doesn’t care as much about CLV. The maximum value of a given customer is limited, due to the low profit margins of fast food.
Instead, fast food businesses focus on CPL. Constantly bringing in new customers is a core part of the business model—as is enticing repeat visits.
The more you can automate measurement, the better. Automated metrics tracking tools improve your measurement’s accuracy and precision. Many software programs on the market readily track:
- Conversion rates
- Bounce rates
- Time on-page
- Social media engagement KPIs
Some KPIs require more in-depth study to track, so they’re challenging to automate. Brand lift, NPS, and ICER are a bit trickier to measure.
Consider hiring a specialist or agency to streamline the process of tracking these KPIs during your campaign. Streamlining could boost efficiency to reduce your overall ad spend.
PayPerClickAuthority: PPC Management by Experts
As a premier PPC management agency, we know choices about metrics and strategies can be fraught. That’s why our experts are ready to guide you through each stage of your marketing campaign.
Whether you’re just interested in learning about how the process works, or you already have a campaign concept, our marketing agents are eager to hear from you. Why not schedule a free, 30-minute consultation today?