Digital marketing can feel like an endless list of acronyms. SEO (search engine optimization), PPC (pay-per-click), CPM (cost per thousand impressions)…the list goes on. Of all the three-letter vocabulary words that make up the industry, one stands above the rest: KPI.
KPIs, or key performance indicators, are the criteria by which your efforts can be evaluated. For example, if you’re starting a new restaurant business, your goal might be to get in front of as many people as possible. If you’re launching an ecommerce store, conversions might be what you’re after.
While all businesses have different marketing objectives, some KPIs stand out as most significant. In this article, I’ll rank them and explain the rationale behind their place on the hierarchy.
1. Cost-Per-Customer Acquisition (CPA)
(*CPA is also sometimes used to represent cost-per-action)
At the top of the ‘Most Important KPIs,’ the CPA, or cost-per-acquisition (sorry accountants), represents how many marketing dollars it takes to turn a stranger into a paying customer. It’s an inexact equation, but it’s vital to determine a rough estimate for what it costs to obtain new business.
It’s hard to pin down just one number that marketers should be concerned with, but at the end of the day, your goal is to get as many customers as possible while spending as few dollars as possible. For that reason, getting that CPA down to the lowest obtainable number is the never-ending challenge for advertisers.
Right behind the cost-per-acquisition is the cost-per-lead. If you aren’t generating revenue directly online, it’s beneficial to at least identify people who are interested in learning more about your services. For example, a roofing company isn’t going to sell you a new roof with a quick add-to-cart online checkout, but they may be able to get interested users to fill out a form requesting more information, then follow-up directly after.
Keep in mind that generating a lead does not necessarily equal a return on investment. Businesses that run lead-generation campaigns must follow-up quickly in order to make initial contact with a potential customer while they’re still interested (and before they contact a competitor).
3. Click-Through-Rate (CTR)
Marketers and graphic designers are always searching for a creative strategy that “pops.” It’s as much (if not more) of an art than a science, but the click-through data typically serves as the mechanism by which creative performance is evaluated.
If you’re unfamiliar with the term, click-through-rate (commonly referred to as CTR) is the total number of clicks your ad receives divided by the number of impressions. It’s a great indicator of whether or not your audience is responding to your creative or if it might be time to switch things up.
4. Bounce Rate
Unlike the other KPIs on this list, you want your bounce rate to be as low as possible. Web UX and graphic designers know that a high bounce rate is the enemy of a high-functioning site and are constantly making adjustments to get the number as low as possible.
A website’s bounce rate is the percentage of users who leave the site after viewing only one page. It’s a measure of whether or not a website is keeping its audience engaged and entertained, or if it’s time to make some optimizations. If your website’s bounce rate seems to be going in the wrong direction, it may be time to for some new content or a design facelift.
Keep in mind that if your ad is linked to a landing page which does not correspond to the ad’s messaging, there’s a good chance you’re going to see a high bounce rate. Keep your site’s speed up, content fresh, and your audience will respond positively.
5. Traffic to Lead Ratio
Frequently left out of most KPI lists, the traffic to lead ratio is truly an underrated measure of marketing success.
Advertisers love to boast about how much traffic they’re sending to a website, but if those clicks don’t turn into conversions, how much is that traffic really worth? Your traffic to lead ratio can set the record straight.
To calculate this number, simply divide your total website visitors by the number of leads your site generates. Remember, there’s no benchmark that you can apply to say what qualifies as a good or bad ratio, so your ultimate goal should simply be to improve this number on a regular basis. Work with your web team to reduce friction and facilitate conversions by paving the way for potential customers.
6. CPM (Cost Per Thousand Impressions)
Perhaps the most widely-used KPIs throughout the entire marketing industry (not just digital marketing) is CPM. Cost per mille (mille=thousand) is used to determine how much an advertiser will have to spend on a certain network to get a thousand sets of eyeballs on their brand. If there’s one metric to look toward that would suggest digital marketing is the most cost-efficient, this is probably it.
This one doesn’t necessarily speak to the performance of your ad campaign, but rather acts as a guide to help you determine where to spend your budget. Typically, digital marketing platforms will have a significantly lower CPM that other forms of media like television and radio. It’s for this reason that smaller budgets tend to gravitate toward the affordability of social media and other digital ad options.
Impressions don’t necessarily mean sales, but for businesses who are looking to spread brand awareness amongst a target demographic, looking at your options through the lens of CPM can help you do it in the most efficient way.
Marketing campaigns can have a range of different objectives, so the rankings on this list do not necessarily apply to every single one. With that being said, it puts into perspective which numbers indicate success when you evaluate the budget-efficiency of your advertising strategy.
Not all businesses have experience with executing a holistic marketing campaign that find prospective customers where they’re spending time online. If you could use a partner with a proven track record, get in touch today and we’ll work to build a plan that fits with your business goals.