Pay-per-click (PPC) advertising can work in tandem with organic content marketing to drive traffic to your webpages. With budgets being constrained due to COVID-19, making the most from your investment is of the utmost importance.
For this reason, keeping tabs on and analysing metrics is the best strategy for supporting a profitable campaign. Here are four metrics that you should keep an eye on before and after your next investment.
Return on investment
Tracking return on investment (ROI) seems like a no-brainer for marketers and advertisers, but it is often overlooked. The ‘CMO Survey 2020’ found that 35% of companies are still not able to prove the impact of campaigns quantitatively.
Doing so is crucial as it underpins everything you are doing. Without positive ROI, the time and resources you put into PPC are unlikely to be justified.
You don’t need to come up with an exact ROI though – a ballpark figure is a viable jumping-off point. To calculate ROI, simply subtract the amount of investment from the profit you expect from new leads and then divide this number by the investment again.
If you expect £3,000 profit from new business with a £750 advertising investment, you will have made £2,250 overall. Dividing this by £750 gives you an ROI of 300%.
An ROI of 300% means that your new PPC campaigns are definitely worth the effort. Remember, this is just a preliminary figure.
You can improve ROI during campaigns by using tactics such as improving landing conversion rates, overhauling the quality of ads and adjusting bidding strategies.
Cost per lead
The cost per lead (CPL) metric will help you analyse the profitability of your PPC campaigns. You can calculate this by dividing the number of leads into your total advertising budget.
When setting up a new PPC campaign, this information will give you a good idea about how much you can spend. It is also ideal for setting short-term goals and gauging overall performance.
Reducing the CPL and improving conversion rates is the aim for advertisers. You can play your part here by creating targeted landing pages capable of driving more conversions.
Leads can get away if your landing pages are not up to scratch, which is frustrating after all the hard work you may have undertaken to get them there.
Laser-targeted landing pages with just the right balance of information will reduce CPL, convert more of your leads and drive better ROI.
Customer lifetime value
The customer lifetime value (CLTV) metric is another valuable metric as it helps you work out when you may be able to deliver positive ROI from PPC campaigns.
You can work out this metric by multiplying the average number of purchases that a customer or client makes by the average price of each purchase.
This average is not for one-off purchases but the total amount that someone will spend over time if you can retain their custom.
Content is great for peaking the interest of prospects and engaging with them for the first time. PPC follows up by nurturing the prospect and helping them cross the line to a sale.
Both of these methods can be deployed to build trust, which then increases the chances of multiple purchases.
When you unearth a new lead, you can also choose to down-sell or cross-sell your products and services.
Cross-selling is when you try to sell additional products that are not directly related to the product that may have attracted their interest. This technique can build stronger relationships and drive a higher CLTV.
Overall, keeping tabs on your CLTV will enable you to be more aggressive and informed when making decisions about PPC and general advertising.
One of the most important concepts in selling is closing a lead or prospect. Being able to determine how effectively you are doing this will help you make amendments and changes in order to improve your PPC campaigns over time.
The metric you are looking for to do just that is called the ‘close ratio’.
The close ratio can be calculated by dividing the number of total leads by the number of sales. This figure can be influenced by a range of factors, so it is not as simple as saying that a 30% ratio is ‘good’ and a 15% ratio is ‘bad’.
These factors include the quality of your follow-up process, how quickly you attempt to re-engage hot prospects, the types of offers you send, and your general level of brand awareness.
You can deploy a few tactics on the ad side of your campaigns to improve close ratios. In a similar vein to personalised content, highly targeted PPC can push potential buyers and clients along the cycle more effectively.
You could also optimise your use of keywords by removing underperforming phrases and improve the quality of landing pages.
Obviously, higher close rates are always better, but a good ballpark figure to aim for is 20% to 30%. If you are not hitting the lower end of that range, try to see if there are any quick fixes you can make.
The close ratio can also be used to determine the potential new revenue available to you at any one time.
If you currently have 20 new leads and a 20% close ratio, you can multiply the two numbers, 20 x 20, and then multiply by the average CLTV for your company.
A 20% close ratio means that around four of those 20 leads will be closed. If your CLTV is £1,500, this means that these leads could potentially bring in £8,000 in revenue.
These financial figures are particularly useful when setting goals and defining budgets for campaigns.
Paid advertising can be used with content to grow your business, so it’s vital that you know exactly how much you need to invest and when to make PPC campaigns profitable.
You can do all of this before you even spend anything, and it will continue to inform important decision-making thereafter.