Getting into advertising your store is super fun, especially when you start seeing results. There are many different metrics to measure success against, but when you want to progress but are faced with a table full of hundreds of metrics, it’s hard to know which ones you should focus on. In this blog we cut through to the 5 most important stats professional campaign managers care about and break down what they mean and how they relate to each other. In a sub-10 minute read you can know your LTV from your CPA and know how CR leads to ROI. Let’s do this.
Pic Chester Wade c/o Unsplash
When you build your first pay per click campaigns it can take a bit of time for them to get going, but after you’ve given it a chance it makes sense to monitor your budget and results carefully. There are so many results to view though in the form of metrics and KPIs that it can show a confusing picture.
Once you know what metrics matter, adjust the columns that show your campaign metrics and configure your interface to suit your desired outcome.
Figuring out how to benchmark success starts at familiarising yourself with some of the most meaningful metrics. You can hover over each metric in the Facebook and Google interfaces to get an explainer on what some of the acronyms mean, whilst we list some of the most meaningful and why we think they matter below.
- CTR. Click through rate helps you see what percentage of folks click on your ad. A high clickthrough rate means people are super excited about your content, and a low click-through rate means it is perhaps less compelling.
- CR. If 100 people click on your ad and 2 of those buy something, that’s a 2% conversion rate. This helps measure how great your visitors think your store style, design quality and descriptions are. Incredible stores have double-digit conversion rates from targeted ads.
- Reach, views etc. There are many metrics in the ad manager about the size and number of people who have seen your ad. Seen is loosely defined. To what extent someone scrolling past your content really engaged with it is debatable, so take care with this kind of metric. There are some instances where paying to increase likes and interactions make sense: For example, if you want to grow a qualified audience so that you can use that as a seed audience to then generate a lookalike audience that you have a campaign in mind for.
- ROI / ROAS. This shows your ad spend to revenue earned. This ad helps you understand if you are getting a direct return on investment or return on ad spend – an incredibly powerful metric. But there are two schools of thought on how you should assess that. A conservative approach would be to look at the first purchase only and if you’re not making a profit on that, scrub the campaign. But in reality, customers often make a second or third purchase.
- CPA. Cost per acquisition tells you how much you spend on ads per sale, and if most of your sales are new customers, this is a good way to see how much it costs to get a new customer.
The value of a customer is all of their purchases, the LTV or lifetime value, not just the first one. So focusing only on first purchase ROI could prevent you from recruiting customers that may in time pay back that initial spend.
That’s where CPA is handy. Cost per acquisition tells you how much you spend per new customer converted. If you know your LTV is, say, £100, and cost per acquisition is lower than your profit on that, you are making profit – even if the first purchase ROI is not on the face of it profitable. This relies of course on you continuing whatever work keeps customers engaged over the customer lifetime in the past, like newsletters, new product launches and social media narrative.
It’s important to think about what metric matters to your brand, because each business is unique.
If you are building a brand that customers really buy in to, your LTV will be stronger so your CPA can be higher and you might be less worried about first order ROI, and your campaigns can be broader and volume focused. If you are doing a time limited store, or have a one-time purchase customer, you can either think of strategies to increase basket value or make sure you go super specific, lean and narrow on your campaigns to focus on that first order ROI.