KPIs – What Are They Good For?
Spend, Conversions, Revenue, CPL … all terms we are familiar with as pay-per-click advertisers. But what exactly are these metrics telling us? How can we translate these digital goals into real-life performance benchmarks? Let’s discuss the role of KPIs.
What are they?
KPIs are Key Performance Indicators – they help “indicate” the success (or lack thereof) of your PPC campaigns by setting empirical goals to measure against actual performance. KPIs can be tracked daily, weekly, monthly or for any period of time – they help paint a picture of the performance from your advertising campaigns for any given amount of time.
The term did not originate specifically with online marketing, but with the power to track every click, sign-up and online sale, KPIs have never been as easy to measure or utilize to our advantage.
If you are running an eComm store, then the natural KPI is your Return on Ad Spend (ROAS). But the total revenue generated is important, too. If you want to generate leads at a certain cost, then you will look at cost-per-lead (CPL). But what can the bounce rate tell you? An effective advertiser will identify its primary KPI to determine success, but also will look at secondary KPIs to tell the whole story.
ROAS is simply revenue/spend, or how many dollars you generate for every dollar you spend. eComm advertiser is generally straight forward, but you also can consider actions such as newsletter signups or requests for more info, as these can lead to sales in the future whether online or offline.
How to measure?
The big agencies use fancy (and expensive) proprietary tools to help keep track KPIs of their client portfolio. These tools are helpful, but can really cut into your margins if you are promoting your own website, or just have a small set of clients. With some moderate Excel knowledge, any advertiser can create a snapshot of overall performance based on a few KPIs.
Most clients have set advertising budgets, and even if they do not, will at least have a minimum amount of money to be spent (for simplicity, we will set the time period to one-calendar month). Simple Excel formulas will allow you to see where you stand for the month, whether it is the 3rd or the 30th. The end of the month can be a ripe time to drive some conversions, when other advertisers have already blown through their monthly budget. Many times, it is a good strategy to make sure you have dollars left to spend at the end of the month, when greener advertisers may have already shut down until the first rolls around. Set Up another formula to tell you how much spend to target on a daily basis to carry you through while still hitting your budget goal.
For lead generation advertisers, CPL is the most common indicator of success. But what if your lead count is low? What other data can help? Pages/visit and bounce rate are good indicators of the engagement with the site. Measuring phone calls is also a must, and people who would rather pick up the phone and talk to someone still exist.
But what do they mean?
At Clicks and Clients, we like to think of ourselves as a profit-based agency. Key Performance indicators are just that – they indicate success. But we need to take it a step farther.
How many of the leads generated are actually turning into customers?
How many of the orders received are being cancelled because the item is currently out-of-stock?
KPIs give a bird’s eye view of your performance, but often deeper digging is required to find out the true benefit from your advertising. What is going to sustain your or your clients’ business in profit, and if the bottom-line goals are not being met, then the campaigns simply are not sustainable. KPIs give a snapshot at any given time of performance, but you also have to consider all factors when deriving true meaning to the metrics.