4 Marketing KPIs To Measure The Health Of Your PPC Accounts
Do you know how to measure your account’s health? Which metrics do you report on for your clients? Marketers throw jargon like ‘KPI’ around all of the time, but how often do you reflect on the jargon’s importance?
Marketing KPIs (key performance indicators) exist in most fields. They’re how you measure progress and success. They also provide talking points you can use to explain how campaigns are performing.
Why use KPIs to measure account health? The best way to measure the health of an account is based on concrete metrics and goals. Even if your client hasn’t given you a goal, you can help yourself to measure and achieve incremental improvements by setting your own internal benchmarks that are relevant for that client.
Which Marketing KPIs Reflect PPC Account Health and How to Read Them
There may be many metrics in a Google Ads account, but not all of them are key to your account’s health. Four metrics stand above the rest when we discuss how well your account is doing. These will vary depending on whether your client’s goal is to generate leads or sales. The KPIs we suggest you focus on are return on ad spend (ROAS), cost per acquisition (CPA), conversion rate (CR), and average order value (AOV).
Return on Ad Spend (ROAS)
E-commerce businesses tend to focus on return on ad spend. In Google Ads, you can see this value by adding the column Conv. value/cost. This metric allows you to measure your revenue against your ad cost.
Return on Ad Spend (ROAS) = Conversion value/Ad Spend
Numbers less than one mean your ads aren’t helping you get the revenue you need, while a value of one means you’re breaking even (in terms of revenue at least — not profit!). Anything above one shows that you’re generating more revenue than your ads are costing you.
In short, higher ROAS are a good indicator of account health while low or plummeting ROAS ratios are an indicator of poor account health. While high ROAS in an account does mean your account is performing well, it doesn’t mean that your client is turning a profit. You should always keep the lines of communication open to understand how your ads impact your clients’ profitability.
Note, using ROAS works best when you know at what ROAS your business will be profitable. That involves subtracting your costs from your revenue to determine profit. If you need help with the calculations, this article by Optimise Smart walks you through profitable ROAS calculations.
A Measure of Successful Ads
If your ads aren’t getting a return you’ll need to rethink your whole strategy. When you see your ROAS isn’t hitting your goal, it should be a trigger to drill down and see which parts of your account aren’t doing their part. If you let ROAS (or the lack of it) guide you, you’ll be able to make meaningful optimisations to your account.
When your ROAS goes down, it tells you that you should look for problems but not where to look. Start with identifying which metrics are impacting your ROAS — we use something like this to identify which metrics have had a negative effect on your KPI:
Starting at the top and working down towards the bottom, follow the trail of negative metric movements to find the culprit. In this case, you can easily see that Click Costs were up almost 50%, which was the primary driver in the ROAS dropping.
Once you know this, you can go in search of the reasons. These reasons could be buried in campaign settings (bid strategy, time of day/day of week, locations, devices, and audiences etc) or adgroup settings (new products added to the feed that are not performing, negative keywords needed etc)
This logic also holds true for troubleshooting the other KPI’s — start with the metrics, then dig into the root cause.
Cost Per Acquisition (CPA)
If your focus is on generating leads, you should get familiar with cost per acquisition, commonly known as CPA. You find this by dividing the total cost by total conversions (or leads). This metric tends to be more helpful when you know what a “good” CPA is, but it’s easy enough to find industry benchmarks to help guide you.
Cost per Acquisition (CPA) = Total Cost/Conversions
If you can, ask your client how much a closed lead is worth. Then, you can run the numbers to figure out what an affordable lead looks like. Obviously, not every lead will close, so you could either ask the client what their close percentage is or assume a safe number like 10%. That would mean you’d need 10 leads for one to be closed. Clearly, that’s not ideal but it’s a place to start. More ideally, you’d like to see something like a 33% close rate which is 1 closed lead for every 3 leads that come through.
Armed with that and how much your client makes from a closed lead gives you a set of concrete numbers to measure account health by.
Optimizing for Affordable Leads
Can your client spend $500 on a lead that will only bring in $200? Probably not, unless the lifetime value of the sale is much higher than $200. CPA lets you know if the lead price aligns with the client’s services and revenue needs. This metric will help you to adjust cost per click, targeting, and decide which keywords are too costly.
CPA is a similar marketing metric to ROAS for those who need leads rather than sales. When CPAs rise, you need to investigate. Has your cost per click risen as well? Are there keywords that are no longer converting, or are they now converting at a premium? What other elements are impacting the change? Analyzing location and device performance and bids might reveal hidden issues. Is there a costly audience that needs to be paused? If you pull back the layers, you can make changes that will right the ship.
Conversion Rate
Conversion rate is just what it says on the tin; the rate at which you’re converting. You can calculate it by dividing conversions by clicks. Clicks and very few conversions mean a low conversion rate.
Conversion Rate = Total conversions/Clicks
Do Your Ads Hit Home?
The other KPIs we’ve discussed cover profitability, but this one is a more granular statistic. Conversion rate tells you how well the ads and landing pages are working. Are you getting clicks, but they’re not converting? Maybe your price is too high compared to competitors? Or are you not getting clicks? A high CPA should also prompt you to check keyword quality scores and ad quality.
Use these stats to pull the right levers in your account.
Average Order Value
This is another metric vital to e-commerce businesses. It’s the mathematical average value of your orders for a given period. It tells you roughly how much you make per sale and lets you know how many conversions you’ll likely need to achieve your revenue goals.
Average Order Value = Revenue/number of orders
Are you Getting the Best Bang for Your Buck?
A high average order value is always a good sign. But, if you sell a low ticket item, average order values may naturally be low. Higher AOVs are ideal because multiple sales tend to be more costly to deliver than single ones. If your CPA is $50, then in theory, an average order value of $100 would be good, but an AOV of $200 would put you in a much better place.
These KPIs can be considered the temperature gauge for account health. Sure, other metrics play in, but these are the best statistics to understand whether or not you’re on the road to hitting your client’s goals.
AdPulse can help you keep your accounts healthier with less effort. We can assist you with budget, KPI setting, and tracking performance.
If you have any questions about tracking KPIs please feel free to email us directly
