Impressions. Clicks. CTR. Conversions. CPA. CPC. If you’ve done any amount of PPC, there’s no doubt you’re familiar with these basic metrics. And there’s nothing wrong with building your PPC strategy around them. But once you have an account that is running optimally based on these metrics, you may find that you need to step up your metrics game in order to figure out your weak spots and opportunities within your account. Here are a few advanced PPC metrics that aren’t included in your standard PPC account, but you should really be paying attention to.
Production Cost Per Conversion – If you’re running a PPC account, you definitely need to have some revenue attribution tied in to your conversions. Fortunately, AdWords and Bing Ads both have standard options for this within their conversion tracking offerings. What they don’t offer, though, is a way to track your total production costs per conversion. This can be a tricky thing to calculate depending on what your conversion event is. Companies focused on lead generation will have to figure in sales team salaries spent working the lead. E-commerce companies need to figure the wholesale cost of their items, or the materials cost of what they manufacture. Without this number, it’s difficult to figure out the next non-standard metric…
Profit Per Conversion – Having a decent CPA is cool, but if you’re just looking at your return on ad spend then you might be miscalculating how much money your company actually makes on PPC. To figure out profit per conversion, you’ll need to take your total revenue, then subtract your production costs and ad spend. This will give you your true return on ad spend. Without knowing your real profit per conversion, you could be optimizing your CPA toward a false target that actually causes you to lose money on each transaction.
Value Per Impression/Value Per Click – You can find this metric by dividing your total revenue or your total profit by your total number of impressions or total number of clicks. Make revenue your “value” if you want to grow total revenues, and choose profit as your “value” if you want to make overall profitability your goal. Tracking this metric helps you bid more efficiently. If you know your value per click, then you can look at your average CPC and adjust bids so that average CPC becomes lower than your value per click. You may even find that some keywords that looked good at first are actually unprofitable. If you’re running display or remarketing campaigns, you can use value per impression in a similar way to adjust your CPM bids, if you use that instead of CPC.
Lifetime Value – Lifetime value (LTV) is an estimation of the total revenue that you’ll earn from a customer over the course of their business relationship with your company. There are very few businesses that only ever do one transaction with a customer – repeat business is a very valuable thing. Knowing a customer’s lifetime value helps you decide if you can be more aggressive with your initial acquisition costs of a customer, since you know that they’ll become a repeat customer. If you’ve ever entered into a PPC auction and found that your competitors seemed willing to tolerate a much higher CPA than you were, you might be contending with companies that are bidding toward lifetime value. If you have a much higher LTV than what you earn on your initial conversion value, then knowing your customer’s lifetime value can drastically alter your bidding and CPA strategy within your PPC account.
The overall lesson here is that you don’t have to rely on the stock metrics that PPC networks define as “success.” Think carefully about what your business defines as success and use metrics that will help you achieve that. Relying on others to make this definition for you only limits your business’s potential.