Not all metrics are created equal, and not all of them are relevant to every business. By fixating on the wrong metrics, you run the risk of not seeing the real ROI your AdWords campaigns are generating. This may lead you to make decisions, such as targeting the wrong keywords, which can end up costing your business.
While some metrics are more relevant than others depending on your business and its goals, there are a few that you should almost always pay attention to. These are:
1. CPA – Cost Per Acquisition
Cost Per Acquisition, or CPA, looks at the total amount your company spends on a campaign and the number of conversions the account has achieved.
The CPA of a campaign can be calculated using the formula: total spent / total acquisitions. The spent portion will be derived from the amount of money spent on a campaign, but it is not as thorough as the total ROI (return on investment) metric listed below. Cost Per Acquisition is also referred to as Cost Per Conversion.
2. Cost Per Lead
The cost per lead, or click-through rate, allows your company to determine how often your ad is being seen and how often your it is clicked. Google uses this metric to interpret the overall quality of an ad, and you should too.
Cost Per Lead demonstrates how well an ad performs with your target audience.
Calculation of cost per lead is done with the following equation: total clicks / total impressions.
3. CTR- Conversion Rate
One thing that AdWords management firms continually analyze is a campaign’s conversion rate. Using the simple calculation of conversions / clicks * 100, the conversion rate of a campaign can be calculated.
Conversion rates will indicate where money is lost in a campaign and can lead to landing page tweaks to bolster results.
4. CPC- Cost Per Click
The cost per click, or CPC, is a metric that is calculated with this equation: total money spent / total number of clicks. CPC is the building block used by AdWords management companies to determine the base cost of a click. The metric will then be used to fully understand the costs behind a campaign.
5. ROI – Return On Investment
Ultimately, the goal of Google AdWords should always be to see a strong return on investment. This metric looks at the entirety of a campaign to determine how beneficial it is to a company.
A campaign’s ROI is derived from (revenue – cost) / investment cost * 100.
The biggest error that companies make with this metric is that they neglect to add in the agency cost of running a campaign into the total investment cost. Investment costs, to be calculated properly, need to include every last cent spent on a campaign. This includes landing page design costs, ad management costs, ad creations, content creation and anything necessary for your company’s campaign to run successfully.