By Sommer Burbank
Digital advertising is one of the most effective channels to get in front of your ideal customers. From interests and demographics to life events and customer lists, the parameters you choose for your ad targeting can help maximize the performance of your campaign and drive better results for less money.
There are multiple Key Performance Indicators (KPIs) that showcase how well your campaigns, ad sets and ads are performing, so it can be overwhelming to know each KPI and understand how to interpret the data. Continue reading for a breakdown of the top 6 digital advertising KPIs and how to improve them.
Top Performance Metrics & Their Meanings
Link Click-Through Rate (CTR)
Your CTR is the total clicks your ad receives divided by the ad’s total impressions. This percentage can help determine the relevance and quality of your ad messaging and media. For example, a link click-through rate of 0.30% for an ad set targeting men and women interested in tequila on Facebook may indicate issues with ad set targeting, ad copy and/or ad creative, while a link click-through rate of 1.52% for a specific ad within that ad set could indicate a positive correlation between a particular copy variant and image used within the ad set's targeting parameters.
Cost Per Link Click (CPC)
CPC is the cost you’re paying for each ad click, which can be calculated by taking the total amount of spend divided by the total number of link clicks. Who you choose to show your ads to, how people react to your ads, where your ads show on a platform, how competitive your targeted audience is, and what optimization for delivery that you set for your ads can all influence how ideal ($1.93), average ($3.32) or expensive ($7.55 and up) your costs per click are.
Cost Per Acquisition or Cost Per Action (CPA)
CPA is the cost to acquire a new customer in a marketing campaign, which can be denoted by total campaign spend in a given time period divided by conversions acquired in the same time period. If your campaign is optimized for purchases, your CPA is the amount of marketing dollars spent per purchase. Your CPA works in conjunction with your CTR and CPC to showcase the relevance and quality of your ads, all of which can also vary by campaign objective (traffic, add to cart, purchase) and industry (retail/e-commerce, alcohol).
Conversion Rate (CVR)
CVR measures the total ad purchases divided by total ad clicks. A low conversion rate indicates that your ads are generating a low number of conversions compared to the number of clicks generated, while a mid to high conversion rate (1-2% or higher) indicates a healthy relationship between the number of people who made a purchase compared to the number of people who clicked on your ad. On average, you should aim for at least a 2% conversion rate for your alcohol e-commerce store.
Average Order Value (AOV)
AOV is the total store revenue divided by total order volume over the same period of time. It is important to achieve a higher AOV, especially if you run an e-commerce business and are looking to increase your store revenue and return on ad spend over time. Check out our three proven strategies for increasing the average order value.
Return On Ad Spend (ROAS)
ROAS is the total ad revenue divided by total ad spend. If you spent $1,000 on an ad campaign that generated $2,000, your campaign has a ROAS of 2 or 200%. This means it generated $2 for every $1 spent.
How to Improve These Metrics to Enhance Your Campaign Performance
To optimize the above metrics, it is important to view them as pieces of the same pie. Each of these metrics works together in an ecosystem to generate the best results at the lowest cost. Always evaluate your CTR together with the conversion rate and cost-per-click to understand how your ads are performing, then factor in your CPA, AOV and ROAS to determine which ads are the most profitable for your e-commerce business.
Try the following optimization tricks to improve your campaign performance:
- Implement conversion tracking across multiple channels: install the Facebook Pixel and Google Analytics on your e-commerce site to track site visitors and know where your traffic is coming from.
- Know your target audience and speak directly to them: a California-lifestyle RTD brand may want to focus their efforts in California on men and women aged 21-45 who are interested in tequila and ready-to-drink cocktails.
- Split test your ad creative, copy and landing pages: gather learnings about what appeals most to your target audience.
- Avoid high ad fatigue: always test new ads or ad set targeting to keep your content fresh and your audience engaged.
- Set up retargeting/remarketing campaigns: warm audiences, or users who are familiar with you and your product, are more likely to click on your ad, thereby increasing CTR and lowering CPC. You can create custom audiences of people who have interacted with your posts or ads, visited your site, and more in Facebook Business Manager.
- Make an offer they can’t refuse: test shipping offers, % off discounts and limited-time product bundles to attract new customers and keep old customers coming back for more. Be sure to clearly highlight any offers before and during the checkout process.
- Optimize your ad landing pages for conversions
One of the best ways to boost the profitability of your business is to eliminate wasteful ad spend. By optimizing these metrics, you can improve your campaign performance, thereby maximizing your ad dollars, reducing your customer acquisition costs, and ensuring that your ads convert clicks into customers.