It would be nice to think that advertising is as simple as posting an ad and watching potential customers wander right in. But understanding the efficacy of an ad is far more complex than posting it. For a business to know whether or not it is succeeding online, it has to examine its key performance indicators. 

In digital advertising, a key performance indicator is a quantifiable way for a marketer to understand whether or not their advertising campaign is working. If they do not pay attention to a key performance indicator, there would be no avenue to understand if any marketing campaign is successful.

What Are Key Performance Indicators?

Key Performance Indicators (KPIs) are measurable, quantifiable benchmarks that help determine the efficacy of a brand’s strategic, operational, and financial efforts. By paying attention to KPIs, a marketer can measure the performance of their campaigns. 

A KPI is focused on an objective such as increasing revenue or website referral traffic. Among KPIs, marketers might track web traffic sources, leads and cost per lead, page views, returning visitors, goal completion rate, and customer acquisition cost. As well, they may track click-through rates, conversion rates, return on ad spend, and customer lifetime value. 

Whatever the goal, all KPIs should focus on revenue and its drivers. The point is that marketers track quantitative data over a specific time frame to gauge their success.  

What are Click-Through Rates?

A Click-Through Rate (CTR) is the amount of consumers who actually click on ads versus the ones who merely view them. This can apply to any digital campaign where a marketer has a link encouraging potential customers to click through to a landing page.

CTRs are calculated by studying the ratio of clicks to impressions. For example, a ratio of 5 clicks for every 100 times potential customers view an ad would be a CTR of 5%. On average, CTRs tend to be about 2%. By calculating the CTR, a marketer can understand how engaged potential customers are with their marketing efforts.

What is a Conversion Rate?

A conversion rate (CR) is a measurement of the percentage of customers who complete a specific desired action. These conversions change depending on a marketer’s goal and can consist of actions such as purchases, clicks, leads, or downloads. By paying attention to CRs, marketers are able to measure progress over time.

A person can calculate a CR by the number of clicks or visits divided by the number of conversions. For example, a CR of 4% means that 4 people out of every 100 who see an ad go on to complete a conversion. 

What is Return on Ad Spend?

Return on Ad Spend (ROAS) is a representation of a marketer’s profit or loss compared to their spending. A marketer can calculate ROAS by dividing the profit an advertisement creates by the total amount spent on advertising it. In doing so, they will understand the amount of revenue made for each dollar spent on advertising.

By keeping track of ROAS, a marketer can determine the efficiency of an advertising campaign, optimize their budget, maximize their profits, and evaluate the performance and profitability of an advertising campaign. Insights garnered from ROAS also help a business to develop effective marketing strategies and set realistic objectives for the future.

What is Customer Lifetime Value?

Customer Lifetime Value (CLV) is the value of a customer to a business over their lifetime. For companies that provide repeating and subscription services, CLV is essential to understand, as it provides a more accurate picture of returns on marketing investments. 

CLV is indicated by two other values. The first is the Average Customer Value (ALV), which is the average amount a customer spends during a period. The second is the Average Customer Lifespan (ACL), which describes the average time between a customer’s first and last purchase from a marketer’s company. 

Thus, by multiplying the amount of money a customer spends by the number of years a marketer expects them to stay, they can calculate their CLV. 

Understand Your Key Performance Indicators with Alan and Co Marketing

Paying attention to KPIs can mean the difference between successful and failed digital advertising. By checking on KPIs, a company can adjust their strategy as needed, saving time and money. However, there is no reason to do this alone. 

If you’re looking for marketing assistance, Alan and Company can help. With expertise in drug rehab SEO and experience marketing for drug rehabs, Alan and Co Marketing can get the word out about your brand. Contact us today to learn how our digital marketing agency in the US can help you.