KPI, popularly, 'Key Performance Indicators' is a known term across industry verticals. This metric indicates the health and performance of a given campaign and its internal elements. Alike, PPC KPI reveals how successful a campaign was and how well it performed.
9 PPC Key Performance Indicators
For PPC professionals, it's essential to have a campaign aligned with different KPIs right from the campaign planning phase. In the article, I have explained 9 major key performance indicators (KPIs) in briefs:
If an ad interests a user, he clicks it. This is where conversion begins. Although, not the sole indicators of a campaign success, clicks show an early-bird view of where is your campaign heading towards.
This KPI helps advertisers gauge and measure how many people clicked on their ad. Marketers check this KPI throughout the month to decide whether to pause an ad that's performing or to discontinue one that's not getting enough click.
2. Click-through Rate (CTR):
Another important metric to measure campaign performance.
CTR can be calculated by dividing the total number of clicks campaign received in the month by its total impressions. If we go by this, out of 1000 impressions, if your ad was clicked 100 times, your CTR would be 10.
You should be vigilant about CTR and the ways you can measure it. It directly impacts your campaign performance. Do note, there is no mechanism that can calculate accurate CTR as it could vary by industry and several other important campaign variables.
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3. Quality Score:
Although third in the list, quality score is the most important, yet volatile KPI for advertisers. By taking clue of various performance variables like landing page experience and more, Quality score tells advertisers how relevant your ad content is.
Google finds out campaign's quality score by using its expected CTR, landing page experience, ad relevance, and ad format.
Any quality score between 7 and 10 is deemed the good one. If your score falls in this category, you will have to pay less to advertise with AdWords.
Although PPC marketers set a predetermined budget for an ad campaign, It necessarily doesn't mean that this is the amount they will pay. The amount an advertiser usually pays for putting up an ad and for the clicks it generates is largely based on what other competitors paid for the bid.
CPC can be calculated by dividing the total cost of a campaign by the number of times the ad was clicked in that campaign.
5. Cost-Per Conversion : (CPA)
Average CPA are calculated by dividing the total cost of conversions by the number of conversions. CPA is the metric that tells about the price advertisers pay for new customers they acquire. Usually, the cost for the CPA is set in the beginning when a campaign is launched. Google takes in the consideration campaign's quality score to determine the CPA.
6. Conversion Rate:
Every business floated whether online or offline aims at only one goal- conversion. Conversion is the master metric of a campaign being run in the first place. Companies hire PPC experts and invest budget on campaigns to get more and more conversion out of the clicks happened. A layman definition of the conversion would be the number of people who performed actual transaction and purchased the service / product shown in the ad.
The conversion rate can be calculated by dividing the number of conversions the campaign received by the total clicks. Suppose, a campaign had 100 clicks and 10 conversions, the conversion rate would be 10 percent.
7. Impressions Share (CPM):
'Impression' in AdWords means someone actually viewed your ad. It doesn't count whether the viewer clicked on the ad or not. Huge ad impressions aren't an indicator of a campaign success as they don't really mandate the effectiveness of a campaign.
Impression share can be obtained by dividing the total impressions your campaign received by the total number of impressions your campaign was eligible for. Google estimates impressions by taking into the consideration factors like targeting settings, approval statuses, and quality score.
8. Average Position:
You have noticed both in case of Google and Bing that they display paid search results at the very top of the search engine results page (SERP). 'Average position' metric is indicator which position an ad is shown in most of the time.
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Which advertiser will hold the first position isn't determined merely by the bid amount an advertiser offers, rather the average position is decided based on ad rank. Google calculates ad rank by multiplying quality score by an advertiser’s max cost per impression (CPM).
9. Lifetime Value :
The metric gauges and measures business’s customers lifetime with their product and/or services. Google implements many methods to calculate LTV. In some case, the value can be calculated simply by looking at the number of days, months, or years a client stayed with the platform, while in case of big companies, there are numerous considerations to keep in order to calculate this metric. This includes an average customer lifespan, customer retention rate, profit margin per customer, and applied discounts.
PPC KPIs are not limited to the above list, but may have others as well. We have included the most important indicators from a possible list of KPIs.