All healthy businesses today have a clearly defined set of key marketing metrics. They use these figures to help them correctly analyse the efficiency and strength of their marketing efforts. Over the course of the past few years, digital marketing has become an integral part of what a company is to its customers. Having an online presence today is no longer a success factor, it is an absolute must regardless of the industry you are working in or the nature of your business. In consequence, measuring performance has become critical in identifying the strong and weak points of your digital marketing strategy.
In last week’s article, we presented a list of key marketing metrics you can use to effectively measure your website traffic. Today, we want to focus on a different set of analytic tools that have also become industry standards. We are talking about conversion analytics. First, let us start by addressing the most obvious question.
What are conversion analytics?
Conversion analytics are the ultimate success factor for marketers today. They are indispensable key marketing metrics for many individuals and companies today. Generally speaking, the conversion process simply refers to the phase of turning new leads into customers. Since this is quite a broad definition, conversion can mean any of the following:
- Getting a viewer to open your newsletter
- Getting a viewer to download your app and install it
- Successfully convince a viewer to buy your product or service
Whatever the case might be, knowing your conversion rate can give you a clear indication of your businesses performance.
Impressions and Reach
An impression occurs when an ad, social media post etc. appears on a users screen (content was delivered to someone’s feed). It’s as simple as that. It’s important to note that impressions are only the amount of times your ad was displayed, whether your audience engaged with it or not. To give an easy example, let’s say you recently posted an article on Facebook and you registered 200 impressions. This doesn’t mean that 200 people read your article, but rather that it was displayed 200 times on their feed.
Now, the reach simply refers to the total number of views. If we take the same example as above, out of the 200 impressions you gathered, only 100 people have seen your article. It’s essential to understand what these core metrics do, how to differentiate them and also how we can use them to our advantage. The end goal is to boost social media engagement. Therefore, if you register a lot of impressions but you have a small reach, it’s time to re-evaluate your strategy. Furthermore, these are by default key marketing metrics since all social media platforms use them. So even if the concept behind these figures is simple, they are not to be ignored.
Click-through rate (CTR)
Now that we understand impressions and reach, it’s time to talk about the Click-Through rate. The CTR represents the number of clicks per hundred impressions. In the world of digital marketing, this essential metric is one of the most popular and effective conversion analytics. For many businesses, this is a key marketing metric.
The CTR is used to calculate the performance of a social media post, an ad, a newsletter etc. To calculate the CTR, simply divide the total number of clicks to the total number of impressions. To stick to the same example as above, out of the 200 impressions gathered, only 50 people clicked on it. As a result, the click-through rate will be 25%.
Cost per Click (CPC)
This figure is a bit different than the other metrics we mentioned above. Businesses use the cost per click metric to measure costs based on the number of times visitors click on an ad. Therefore, the CPC is the actual price you pay your publisher for each click. As a result, this metric can prove helpful for planning your digital marketing budget as opposed to analyzing campaign performance. To calculate the CPC, you need to divide the cost per impression to the click-through rate.
It’s also important to note that not all metrics are equally useful for all businesses and campaigns. The CPC, for example, applies to pay-per-click marketing and is used by a number of social media platforms that offer the clicks-to-site ad type. In consequence, it’s relevance mainly depends on the platform you are using to advertise & campaign type.
Keep in mind that different platforms work for different campaigns. Think about your business objectives, choose the platforms that work best and then decide on which metrics to use. Remember this before turning the CPC into one of the key marketing metrics for your business.
Cost per Conversion (CPCon)
The cost per conversion is used to measure the total cost paid for an advertisement in relation to the success in achieving its goal. More specifically, this metric shows how much it costs an online advertiser to acquire a new customer. Same as with the CPC, this figure is truly useful only for some online campaigns and businesses. To calculate the CPCon, you need to divide the total costs for generating traffic, by the number of conversions achieved.
Cost per Acquisition (CPA)
Finally, this is the last piece of the puzzle. The cost per acquisition measures the aggregate cost of a customer taking an action that leads to a conversion. In other words, this metric is the total amount you pay for acquiring a new client. As a sales and marketing term, the cost per acquisition can include any of the following costs:
- Marketing materials used to acquire a new client
- Any other related expenses used in the acquisition process
Compared to the CPC, the CPA offers more flexibility and can be used in more situations. This is because the CPA takes into account all the expenses for acquiring a new customer. As a result, this metric is not only limited to the cost of placing ads. To calculate the CPA, divide the total amount spent by the total number of successful conversions.
Now that we have enough tools to work with, we would like to address one final question before we wrap up: Why do we need a deep understanding of our conversion analytics?
Different business models need different campaigns. Different campaigns need different marketing channels. Lastly, different marketing channels need different metrics. You have to identify the ones that help you reach your objectives most efficiently. Therefore, it’s essential to have a thorough understanding of what each of them does. Try to remember this before making any rash decisions to avoid overspending your campaign budgets.
Finally, we want to emphasize once more that every business should actively use conversion analytics to analyse performance. And, it’s equally important to look for the ones that work best for your business. If you haven’t already defined your key marketing metrics, it’s time to get to work!
”Few managers appreciate the range of metrics by which they can evaluate marketing strategies and dynamics. Fewer still understand the PROs, CONs, and nuances of each.” – Paul W. Farris, Marketing Metrics: The Definitive Guide to Measuring Marketing Performance
Not sure what works best for your business in terms of conversion?
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