Do not accept old measures. Learn the most important PPC metrics to deliver long-run and profitable business results.
Are you still evaluating your PPC outcomes in clicks and impressions only? If so, you will soon fall behind the others.
The position of paid media shifted not only due to Google Ads’s release of another wave of automation.
It is evolving due to the change in people. We are in the multi-device, privacy-first, AI-oversaturated world where purchaser focus is bound shorter, buyer funnels are sloppier, and attribution is molecular today or increasingly obscure.
But even now, many advertisers fight to optimize, 2015-style, wearing blinkers to constantly look at dashboards covered with click-through rate, cost-per-click and average positions as though they are the last word in the world.
The unpalatable idea is that PPC has never been about getting a person to click. It is not about taking up space, generating hits, or getting impressive keyword rankings; it is about driving actual, quantifiable business results- essentially profitable, incremental, and sustainable- even in situations where the platforms do not accommodate that.
This is not another listicle-type article informing you that you should optimize your CTR or reduce your CPC. We are getting serious.
In 2017, these KPIs will be crucial, and they are essential to have in your toolkit if you want to stay under your budget, win over executives, and prove the worth of paid advertising without resorting to vanity metrics.
Profit (Not Just ROAS)
The use of Return on ad spend (ROAS) as the default north star in PPC reporting should have been phased out, but frankly speaking, it should.
ROAS alone is a perilously jigsaw-piece view of a complex situation. It explains how many dollars of revenue were earned per dollar of expenditure, but revenue is not profit.
You could have a magic 600% ROAS, but with fulfillment, discounts, or shipping expenses accounting for 70 percent of those sales, you would have 20 percent of nothing.
Conversely, a humble-appearing 300% ROAS campaign may be making twice as much money silently if it is making high-margin deals.
Today, best-in-class PPC teams are aware of this, and they incorporate profit measurement as a core component of their strategy.
They are adding product-level contribution margins and modifying revenue figures accordingly to push such information back into Google Ads or Microsoft Ads.
This allows the setting of algorithms to maximize profit (and not revenue) and provides teams at most a competitive advantage over advertisers who remain entrenched with reporting inflated ROAS metrics.
The idea of incrementality (The “Would You Have Needed This Anyhow?” The metric
This key performance indicator (KPI) distinguishes between marketers who receive it and those who report.
Incrementality makes you question whether PPC was the reason for this sale or if it would have happened regardless.
You may have believed every convert back then, particularly if it was the final click.
With people switching between channels, platforms, and devices and attribution becoming less accurate, you can’t afford to assume that these days.
Incrementality focuses on your real contributions to the company. It involves measuring the increase in lift that your campaigns produce above what would have occurred without sponsored advertising.
Advertisers that engage in incrementality measurement, whether via holdout testing, geo-based experiments, or platform-led lift studies, often discover that some campaigns—typically brand and remarketing campaigns—have less of an effect than they first seem to have.
In fact, quantifying incrementality is challenging. It is difficult to incorporate into Google’s default reporting.
However, CMOs take issue with PPC claiming revenue that would have been earned regardless. They want to know what works in addition to paid media labels.
Advertisers who commit to evaluating incrementality avoid overspending on ads that are just skimming the surface and make wiser budgetary judgments.
Customer Lifetime Value (CLV Or LTV)
Today, there is no justification for disregarding lifetime value or LTV.
First-purchase cost-per-acquisition (CPA) and other short-term metrics have become less important due to shorter attribution windows and higher acquisition costs. The most effective PPC advertisements of today aim for long-term success.
Understanding a customer’s overall worth to the company beyond their first transaction is known as customer lifetime value.
The first conversion is the prelude for many DTC enterprises, SaaS, and subscription commerce. Targeting low-cost CPAs while attracting low-value, one-time clients will negatively impact long-term profitability.
Advanced teams are using offline conversion imports to input LTV data straight into Google Ads, allowing for intelligent bidding strategies to optimize for repeat and repeat clients.
Targeting, creative, and bidding strategies are being manually guided by LTV models that are being built internally by others.
This change is strategic rather than tactical. By optimizing for LTV, businesses increase and improve their client base. Clients who stick around increase spending and generate actual growth.
Cost Per Incremental Acquisition (CPIA)
Even though CPAs still serve a purpose, the real game is CPIA, or cost per incremental acquisition.
One question that CPIA focuses on is the cost of gaining net-new, additional customers—those who would not have converted without this campaign.
The most crucial question is this one, but it’s far more challenging than “What did we pay per conversion?”
Numerous PPC accounts are overflowing with ads that generate conversions but provide no additional lift.
Direct or organic traffic may often be eaten up by branded search, retargeting, and display remarketing.
By adding incrementality testing to your cost analysis, you can get a KPI that shows you how much you paid for a lead or sale and how much you spent on a new customer.
“Are we hitting target CPA?” becomes less significant at this point than “Are we paying reasonable amounts for meaningful growth?”
CPIA provides a seat at the strategy table for the best PPC teams.
Conversion Rate (Context Is Everything)
Although it is not treated as such in most PPC reports, the conversion rate is nevertheless significant.
Too many teams focus too much on increasing conversion rates without considering who the conversion rate is for. What conditions exist?
The conversion rate of a branded search ad is always higher than that of a cold prospect clicking on a YouTube video.
However, conversion rates are often presented as flat averages, which provide no insight into actual performance.
If your conversion rate declines after starting an upper-funnel prospecting campaign, it might be a positive indication that you are reaching new audiences who have never heard of your brand before.
By contextualizing conversion rates, you may avoid rash optimizations that hinder long-term development and reveal the true narrative behind your statistics.
Lead Quality (For Lead Gen Campaigns)
Optimizing for volume rather than quality has been a mistake that has plagued lead generation marketers for years.
When you provide leads below the intended Cost-Per-Lead (CPL), it’s simple to feel good about yourself. It is more difficult to acknowledge that half of those leads will never be converted, or worse, will never even be discussed with sales.
Real PPC executives understand that leads are just the beginning. The number of quality prospects and, ultimately, customers that result from those leads is what counts.
Measuring down-funnel effect and incorporating customer relationship management (CRM) data into your PPC plan are necessary for this.
Time To Conversion
There is criminal underutilization of this KPI. In a time when purchasing decisions are becoming more complicated, it is critical to understand how long it takes a consumer to convert after clicking on an advertisement.
Conversions don’t occur inside Google Ads’ usual 7-day or 30-day attribution periods for a large number of B2B or considered-purchase companies.
Contribution To Pipeline Or Revenue
In the end, this KPI determines whether your PPC campaign succeeds or fails. If you are unable to link your efforts to income or pipeline, you are only investing money and hoping for the best.
The capacity of PPC to generate income is what makes it thrive. This measure eventually feeds into all the others in this article.
