One of the most common questions I get from business owners is “how do I know if my ads are performing well?”. The answer is quite simple. Look at the conversion related metrics! All of the advertising platforms have a number of metrics that correlate to specific KPIs, which can be an eyesore to most, but there are certain KPIs that are great indicators of success. That’s why, in this blog post, we will explore four essential paid advertising KPIs, available on all advertising platforms, that will help you determine the effectiveness of your campaigns.

1. Return on Ad Spend (ROAS)

Return on ad spend (ROAS) is probably the most important metric that helps businesses understand the revenue generated by each dollar spent on advertising. By dividing the total revenue generated by the total ad spend, businesses can calculate their ROAS. For instance, if you spend $1,000 on advertising and generate $5,000 in revenue, you have a 5X ROAS. A high ROAS indicates that you’re seeing a positive ROI, and your advertising campaigns are effective. To calculate your ROAS, you need tracking set up to capture the revenue value of each of your conversions.

2. Cost per Acquisition (CPA)

Cost per acquisition (CPA) is a vital metric that helps businesses understand the cost of acquiring a customer through their advertising campaign. By dividing the total ad spend by the number of new customers acquired, businesses can calculate their CPA. For example, if you spend $1,000 on advertising and acquire ten new customers, your CPA will be $100. A lower CPA indicates that you’re acquiring customers more cost-effectively, and your advertising campaigns are likely delivering a positive ROI. When determining success, you have to truly calculate the ideal cost you’d like to pay per customer. Businesses with several products of varying price points will have a harder time calculating this. Once you have your CPA, can you evaluate the true efficiency of your advertising.

3. Click-Through Rate (CTR)

Click-through rate (CTR) measures the number of clicks that an ad generates relative to the number of times it’s displayed. By dividing the number of clicks by the number of impressions, businesses can calculate their CTR. A high CTR indicates that your ad is resonating with your target audience and is relevant to their interests. High CTR’s also indicate you’re over indexing for website visits based on your ads. CTRs and CPCs have an inverse relationship. Higher CTRs generally result in lower CPCs. Driving the most traffic at the cheapest cost is ideal for any digital business.

4. Conversion Rate (CVR)

By monitoring and analyzing these four essential paid advertising metrics, businesses can gain valuable insights into the performance of their advertising campaigns and truly understand how efficient your campaigns are. You can maximize your ROI and ensure that your advertising budget is being used efficiently by optimizing your campaigns for these metrics. Make sure your business is making data-driven decisions by optimizing towards the 4 metrics we’ve discussed today. If you’re curious about learning what specific metrics your business should focus on, feel free to reach out to me here.