Understanding KPI data and How to Use It — Part Two
In our last article we explained what KPIs are and why you need them. In this email we’re going to discuss advertising KPIs and how to use them.
First Touch Point KPIs
Let’s discuss the first contact point with the site visitor that happens with an ad and important KPIs to measure to refine this end of the user journey. Hopefully it will become clear that different aspects of the user journey have different KPIs but they all should have the most important goal of revenue at the end of the user journey.
Also, different ad types have different KPIs which are linked to the ultimate goal of the ad objective. But for now we’re going to keep the objective simple which is a sale or lead on your website, depending on what you offer.
The Click Through Rate KPI
A very important KPI for your ads is click through rate to your site since you are trying to drive people there to explore your offerings. If your ads have a low click through rate, chances are the ad is not resonating with the audience or you are targeting the wrong audience. This is where testing various audiences and ad media and messaging is important.
Click through rate is a percentage calculated by dividing the number of clicks the ad receives by the number of times it is shown to get the percentage. Let’s say you have an ad that has been running for three months and you are trying to compare the click performance to an ad that has only been running one month.
This is easy to do because click through rate is measured in a percentage of the total views. A higher click through rate percentage can mean that the newer ad is performing better than the one that has been running for a longer period of time even though the longer running ad has more click throughs!
Different industries and channels have different average click through rates, so you want to snapshot where you are, look at averages in your industry and determine if you are driving enough website traffic with your ads.
So if we are trying to get the click through rate up on this side of the user journey AND get the engagement time up on the website on the other end, you can see how these KPIs are incredibly important to dial in your efforts. Just be careful to only adjust one component at a time so you know why something changed.
The Cost Per Click KPI and Lifetime Customer Value
Cost per click is an important KPI as well, as some ads can get very expensive for click throughs especially in Google Ads. But, what you can do is examine your lifetime value of a customer and estimate what you are willing to spend to attract the right customer.
As a rough estimate the lifetime value of a patient to a dental practice is $10,000. Knowing this can help you define your KPIs for what is acceptable as an ad budget and the cost per click of your ads. Another important KPI is cost per acquisition (CPA) which is how much it actually costs you in ad spend to acquire a new customer.
Even if your customer value is only measured in one purchase, knowing that value is important so you can create KPI goals for your advertising performance.
If your main business is installing air conditioners and your profit per install is $970, you might be a little more inclined to test some ads with more expensive click through rates knowing your potential profit is considerably higher than the ad cost per click. But of course at some point your ads need to generate business and that’s where your KPI milestones come in. You’ll know when you are getting closer to success!
Customer Relationship Management Tools
CRM services like Hubspot and Salesforce are wonderful to connect the sale and value of the sale to your marketing and advertising efforts so you can see if your investment is working based on the goals you have defined for your KPIs. There are also cost-effective CRMs for small businesses like Pipedrive.
The Basics are a Good Place to Start
Don’t be overwhelmed by the jargon or the language here. There’s more to it than what we have discussed, but honestly, not much when you look at the big picture of increasing sales. It’s gets easier the more you dig in. Do not be intimidated.
In the next article we’re going to look deeper at real world scenarios, define those KPIs, put goals to them and explain how to measure and adjust for success so we can see the bigger picture of KPI uses. Talk to you soon!
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Putting It All Together for KPI Success – KPI Data Part Three
