Which Key Marketing Metrics Do You Need To Understand?

The acronyms and their calculations

Each and everyday I get the chance to look through a bunch of data from multiple campaigns and make decisions of what to change based on the story the data tells. I find that I’ll rattle off a bunch of acronyms that are often not understood, either in meaning, metric correlation, calculation or significance.

There are a lot of metrics to monitor but here are a few that I see as most important, and I’ve tried to be platform agnostic, so these apply to any digital campaign you are running, though the reference point may change depending on where you are buying traffic.

CTR (Click Through Rate)

[ clicks / impressions ]

This is a key and leading indicator of a few things, namely the congruency between your message in your ad and the audience to whom you are showing this ad.

Additionally, this is a metric that determines the cost of your click. If you are bidding on traffic and paying per click, then you’ll want to optimize this as best you can, because the algorithm on the backend of any ad platform is optimizing what they show to users based on what will make them the most money. If they are only being charged when someone clicks on an ad, well they’ll definitely favor the ads that get clicked on more often.

Typically you’ll see lower CPC’s as you increase your CTR, plus it informs you as the advertiser that you are talking to the right “WHO” and saying the right “WHAT” to them.

CPC (Cost Per Click)

[ ad spend / clicks ]

This can be a key metric, though is often mistaken as something people track too closely. It is helpful to look at it in trends and correlate results with it across other metrics for any particular segment of your traffic.

However, simply having a low CPC does not mean you are winning. That either means you have a really congruent message to the right audience, or there is just not as much traffic bidding to target the folks you are talking to. This easily becomes a local optima that can lead you in the wrong direction. If you are only ever trying to lower your CPC then you are likely missing the boat.

If you see your CPC rising, it can give you an insight to what kind of platform factors might be encroaching. For example, if you see your CPC going up, but your CTR goes down, it’s likely that you are experiencing some ad fatigue, time for some creative and audience testing. On the other hand, if you see your CPC rising and your CTR remains about the same, then you can typically attribute that to more competition in the market. Holiday’s are a good example, almost always, across every vertical, cost will increase with advertising, but so will your conversion rate.

CR% (Conversion Rate)

[ # of converting actions / clicks ]

This is a leading indicator of the health of your campaign in many ways. Conversion is critical to making any money from your advertising efforts, after all, we usually aren’t in the game just to get clicks and impressions, but we’d like those impressions to go somewhere.

Click to Sale is one of most common metrics we look at, typically the sale of the core offer we are trying to move. We optimize around that initial acquisition of a customer first and foremost and then work on ascending that customer to be more valuable.

However, depending on the complexity of your campaign, you will want to measure more than just the conversion rate to the initial sale. In fact, multi-factorial and multi-goal attribution is where all the real optimization can be made. “Sure this source 1 is the least expensive to acquire the customer, but source 2 the customer is worth 3x as much.”

If you don’t have multiple goals in your process, and don’t know your costs through each one of those steps, you’re likely missing out on substantial profits.

Conversion Rate is also the metric that indicates whether or not you are sending them to the right “WHERE”. As mentioned above, What is the message or ad creative you show, Who is to whom you show it, and where is where they go, or your conversion path, sales funnel or whatever marketing lingo you’d like to throw in there.

If you have a high CTR, reasonable CPC but a terrible CR, then it’d be reasonable to believe that the offer you are showing is not congruent with the messaging and audience you are targeting. Many times that’s as simple of a fix as tweaking a landing page, and making the action more clear for them to take, or fixing your language.

CPA (Cost Per Action / Cost Per Acquisition)

[ spend / (actions or acquisitions)]

This is a key metric informing you what it costs to acquire a new customer from that traffic source. This is sort of the holy grail of what optimization of ads will allow you to accomplish. Again, many people end up focusing solely on figuring this out, and then they get it down to $10 and don’t work on the monetization of their offer at all to make it work…

We frequently see sub $10 CPAs on many offers, but only after a lot of tracking and testing and figuring out, the problem here, is if you are only profitable with a $10 CPA then you won’t likely be able to scale.

Remember, he who can spend the most to acquire the customer wins. If you can pay more per customer then all your competition, yet still be profitable, well guess what, you can now buy all of their customers.

RPA (Revenue Per Action / Revenue Per Acquisition)

[ revenue / (actions or acquisitions) ]

Optimizing your costs way down per customer is worthless if your revenue per customer isn’t higher than your cost. So many get lost in the trap of doing everything they can to get costs down, while forgetting about monetization and increasing the value of those customers.

Anyone in marketing that is solely in this to “make a bunch of money quick” and thinks they can just reduce their costs and be good to go will most likely find themselves in the red.

RPA is all about getting the next right logical sequence of events to happen to the new customer, as they have good experiences with you, they become more and more valuable. The higher you are able to get your RPA the more you can afford with your CPA.

This “game” we call marketing is about increasing awareness of a new customer, acquiring and nurturing that customer and ascending their status to a higher value for your business. I hate to consider myself and my team as just a bunch of folk good at marketing, rather, we focus on customer acquisition. We acquire customers whom our businesses can serve. We provide content and value and products to those consumers in exchange for a little bit of their money.

There are a thousand other metrics we frequently look at to diagnose the health of a campaign and source, but an intimate understanding of the aforementioned metrics will quickly help you identify holistic health of your digital marketing efforts.