Which PPC KPIs Should You Be Tracking + Why?
 |
Pathlabs Marketing |
 |
July 6, 2023 |
Let’s talk paid search. This method allows marketers to bid on specific keywords and phrases with the hope of having their ad content appear in target user search results – only paying when users click on the ad, making it a pay-per-click (PPC) model.
Paid search may seem straightforward, but it requires more than just selecting keywords and bid prices. It involves testing, continuous optimization, and lots of tracking; this is where PPC key performance indicators come in.
In this blog, we delve deep into explaining what PPC KPIs are, the different types available, and how to apply them to a paid search campaign.
What Are KPIs?
Key performance indicators (KPIs) are numerical metrics used to measure and evaluate whether a marketer is meeting their overall objectives or not.
An example objective may be to increase how often a paid search ad will show up in search results. The KPI to use could be the quality score, numerically looking at how good the paid search content is and the average position showing where it usually ranks in search results.
Without a KPI, marketers put in the time, money, and effort for unclear results.
What Are PPC KPIs?
PPC KPIs, or pay-per-click key performance indicators, are specific KPIs marketers use to evaluate whether or not they are achieving their objectives in paid search advertising campaigns.
These KPIs provide insights into the overall performance and effectiveness of a marketer’s many paid search decisions regarding keywords, phrases, bid prices, targeting parameters, ad copy, etc.
By analyzing these PPC KPIs, marketers can determine what is and what isn’t working, making corresponding adjustments to current and subsequent campaigns.
Why Do You Need Paid Search KPIs?
“Using PPC KPIs in paid search campaigns is crucial because marketers need to prove that they are getting a return on ad spend and meeting their objectives.”
If a marketer just ran a paid search campaign without KPIs, when they look at the final results, they can only discern how much they spent, not knowing if they met their objective or if the investment was worth it.
If they apply PPC KPIs, they can track and access more valuable data, such as the number of ad impressions and clicks, form submission counts, cost per conversion, quality rank of their search results, revenue generated, and more.
This KPI data paints a better picture showing how users are engaging and how ad content is overall performing, even providing a baseline to compare to future search campaigns.
With paid search being a method that offers so many metrics and data points to track, in addition to requiring lots of testing and optimization, there is really no reason not to leverage PPC KPIs.
How to Choose Which PPC KPIs to Track
“Before delving into the question of which PPC KPIs to track, marketers must first determine their objective. They should avoid getting caught up in details and straightforwardly ask themselves: What is my objective?”
For a hotel, the objective may be to generate more bookings. For a media team, to increase ROAS. Regardless of the case, understanding the most minimal viable objective is crucial from the start.
Next, the marketer must validate how paid search will meet this objective. Is there evidence that users are searching for specific terms worth bidding on? Is there enough budget and bottom-funnel users to justify this method?
If the objective is clear and paid search is indeed the best option, marketers can select their PPC KPIs to track. They should do so by thinking about the paid search funnel they are facilitating and identifying the best spots to hone in on and extract valuable insight from.
This is easier said than done, but at the end of the day, it just requires common sense. For example, if a marketer wants to bring users to their landing page to fill out a form, they should look to the most essential part of the funnel – where users submit the form – and use the number of lead forms submitted as the KPI.
This KPI indicates how many people submitted the form, directly impacting the objective. If they chose a different KPI, like click-through rate, this wouldn’t speak enough to the overall goal, for it only indicates if users arrive on the page – not if they convert and submit the form.
Making the right PPC KPI decision like the one above can be the difference between getting the best results more quickly or spending hours tracking and looking at KPIs that don’t fully speak to the objective.
“The last best practice to mention when selecting PPC KPIs is to only work with one or two at a time. There are many KPIs to use, but trying to paint a big picture with multiple isn’t efficient. Sometimes, a single KPI is enough. Now, if it isn’t working, then it is a good time to explore other options.It’s also acceptable not to choose the proper KPI at first. The goal is to test and optimize to select the best mix.”
The Most Important PPC KPIs + Why They Matter
Average Click-Through Rate (CTR)
The average click-through rate (CTR) measures the percentage of users who click on an ad after viewing it. It reflects the ad's relevancy and appeal to the target audience.
Average Click-Through-Rate (CTR): CTR = (Total Clicks / Total Impressions) * 100
Average Cost-Per-Click (CPC)
Average cost per click (CPC) measures the average amount an advertiser pays for each click on their ads.
It represents a campaign's cost efficiency and helps assess budget allocation's effectiveness.
Average Cost-Per-Click (CPC): CPC = Total Cost / Total Clicks
Average Position
Average position measures the average ranking of an advertiser's ads in search engine results, indicating the relative position of ads compared to other ads competing for the same keywords.
Average Position: Average Position is a metric provided by search engines and does not have a specific formula. It represents the average position of your ad in search results.
Impression Share
Average impression share measures the visibility and competitiveness of ads in paid search.
It represents the percentage of impressions an advertiser receives from eligible impressions.
Impression Share: Impression Share = (Impressions Received / Impressions Eligible) * 100
Quality Score
Quality Score is a metric search engines use to evaluate the relevance and quality of a marketer's keywords, ads, and landing pages.
It impacts the ad's position, ad rank, and cost-per-click. A higher Quality Score leads to better ad placement and lower CPC, ultimately improving campaign performance and ROI.
Search engines like Google assign quality scores based on multiple factors, primarily the relevance of the ad content, the experience of the landing page the ad links to – like loading speed – and even past click-through rates and quality scores of the marketer.
Quality Score is calculated by Google algorithmically, using factors such as keyword relevance, ad relevance, landing page experience, and historical performance.
Conversion Rate
Conversion rate in paid search refers to the percentage of ad clicks that result in a desired action on the marketer's website.
A conversion doesn’t have to be just a purchase; it can be filling out a form, subscribing, following, etc.
Conversion Rate = (Total Conversions / Total Clicks) * 100
Cost Per Conversion
Cost per conversion in paid search marketing refers to the average amount spent to acquire a single desired action on a website.
The cost a marketer is willing to spend on a given conversion depends. They may want to spend less than a dollar for every conversion or be willing to pay hundreds to thousands just to get a single conversion from a super-qualified lead.
Cost Per Conversion = Total Cost / Total Conversions
Return on Ad Spend (ROAS)
Return on ad spend is taking the amount of revenue generated from a campaign and dividing it by the total amount spent. In this case, we look at ROAS in paid search by taking how much revenue is generated from the clicks, divided by how much we paid.
A high return on ad spend means the campaign generates revenue for every dollar spent; A low indicates they are generating less revenue than how much they spent.
Return on Ad Spend (ROAS): ROAS = (Revenue Generated from Ad Campaign / Cost of Ad Campaign) * 100
How to Measure Success in Your PPC Campaigns
There is no single definition of success regarding PPCs KPIs. Instead of initially picking a number, price, or percentage to reach as the KPI result and deeming it as successful, marketers should be focusing on these three questions:
Do we have the correct KPI that measures what we want it to, and can we prove it in some way?
Can we at least increase the KPI result from the baseline?
Are we being self-critical enough and ensuring that we do not prematurely celebrate the positive results but rather try to figure out how exactly we got them?
This is a good approach to take when starting out running PPC campaigns because it prioritizes figuring out what works best in paid search and how to capitalize on it, using the KPIs as the performance data along the way.
Once the marketer can say ‘yes’ to the three questions above and has a strong baseline, they can then focus on consistently growing to a certain KPI parameter amount – continuously revisiting the above-mentioned questions.
How to Set Realistic PPC KPIs with Your Client
Marketers need to approach PPC KPI results with tempered expectations. Teams can do so using a baseline that they initially form using research and forecasting to have as realistic of a picture as possible of what to expect before spending any campaign money. Then, the team can execute and build upon the baseline into the future.
It is also important to align expectations with the allocated budget. Marketers should recognize that the KPI results may not be as high as desired initially with limited budget resources. Positive results often require multiple iterations of paid search campaigns to achieve.
Lastly, the selection of keywords and phrases greatly impacts the reflected KPI results that marketers receive. If the chosen keywords are either too specific or overly broad, there is a risk that KPI results will be low because the target audience may not be searching for those terms. It is essential to strike a balance and experiment with different keyword strategies to maximize KPI performance.
In Conclusion…
Tracking key performance indicators (KPIs) is crucial for the success of paid search advertising campaigns. These KPIs provide valuable insights into various aspects of the campaign, including keyword selection, bid prices, targeting parameters, ad copy, and more.
Analyzing PPC KPIs such as average click-through rate (CTR), average cost-per-click (CPC), average position, impression share, quality score, conversion rate, cost per conversion, and return on ad spend (ROAS) enables marketers to make informed decisions, optimize campaigns, and achieve their objectives efficiently.
To select the right KPIs, it is recommended to follow best practices such as conducting experiments, analyzing data, aligning expectations, continuously optimizing, and experimenting with keyword strategies. By following these steps, marketers can set realistic goals and maximize the performance of their campaigns.
