Key Digital Advertising Metrics All Marketers Should Know
Tracking and measuring your business’ digital advertising metrics is crucial to your campaign’s success.
If you aren’t tracking your advertising methods correctly, you’ll never know what’s working and what channels to focus your dollars on.
Determining your ROI goals also means you’ll be able to evaluate the efficiency of your ads and how your target audience interacts with those ads. Here are a few of the key metrics to track that will help you measure success and determine ROI:
Calculating CPA – Cost Per Acquisition, also known as CPL – Cost Per Lead
How much does it cost you to acquire a new lead on any given channel?
Knowing the cost to acquire a client for your business is the basis of your marketing budget, so it’s crucial data to add to your ROI analysis. Combined with other ad data, this will determine whether your business will make a profit.
Ideally, you’ll want to get a sense for which mix of ad channels (Search, Facebook, Display) work best for your business. Then you’ll be able to better optimize your ad budget going forward.
Here’s the formula for CPA:
CPA is an easy but valuable formula. It is key to understanding your ad ROI, knowing how much it costs to acquire a new lead. However, we still don’t know the actual value of your client’s customers. The next thing we’ll discuss is LTV, which is essential for further ROI analysis.
LTV – Lifetime Value
It is very important to know the lifetime value of your customers. Why? Because it will help you know approximately the revenue a new customer brings in, with all associated costs factored in.
You will also be able to compare it directly to the cost of acquiring a new client through your digital ad campaign.
Here’s the formula you can use to determine your LTV.
CR – Campaign Revenue
Now that we know how to calculate and analyze the lifetime value of your customers, we’ll be able to track the revenue generated by your digital advertising campaign. You just need to multiply your campaign’s conversions by LTV and closing ratio (50% would be .5).
Why include closing ratio? Because, every new lead you generate isn’t going to become a customer, so you’ll need to factor in how often you are able to close new leads to estimate campaign revenue correctly.
ROAS – Return on Advertising Spend
ROAS is an illuminating metric to use for ad campaigns, and a lot of marketers use it interchangeably with ROI itself. Although you can find many significant differences between the two. For instance, Tim Mayer, CMO of Trueffect explains:
“ROI measures the profit generated by ads relative to the cost of those ads. It’s a business-centric metric that is most effective at measuring how ads contribute to an organization’s bottom line. In contrast, ROAS measures gross revenue generated for every dollar spent on advertising. It is an advertiser-centric metric that gauges the effectiveness of online advertising campaigns.”
So advertising ROI incorporates the bigger picture relative to the business, while
ROAS is much more focused on the results from specific campaigns. This means that it’s much easier for you to be tracking and analyzing advertising efforts with ROAS! Since you know the cost and you can calculate the revenue.
Setting your own campaign goals based on past performance and benchmarks is the best way to proceed with your advertising efforts.
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