You have put a lot of effort into launching an excellent marketing campaign. Are you ready to interpret your paid Ads report but still wondering which metrics to prioritize?
Well! There is a long list, as we are not short on metrics today. It would help if you had metrics to do your job well and for clients to measure your performance. These are valid inquiries that even experienced marketers may have. The metrics chosen will vary depending on the business objectives, but we have identified the ones we frequently use to gauge our ad ROI and measure return on investment.
How can you measure the success of your ads and report the results to clients in monthly reports? Let us take you to explore the key metrics that impact return on investment (ROI) in paid marketing and provide insights on how to interpret them for enhanced campaign efficacy.
Deconstructing Return on Investment (ROI)
Let’s offer you a quick reminder of what ROI is. An individual can understand the success of their campaign with ROI or ‘Return of Interest’. By comparing the amount of money generated with the price of running advertisements, it calculates the financial viability of your campaigns.
How do you Calculate ROI?
Here is the simple formula you can use to calculate the ROI of your ad campaign.
ROI= (Revenue-Ad Costs)Ad Costs 100
If your ROI is positive, your campaign is lucrative; if it is negative, you spend more on advertising than you are making. Customer lifetime value (CLV) and your attribution methodology should be considered when interpreting ROI successfully. Although a favorable ROI might not be noticeable right away, it might be felt over time if clients make more than one transaction. Go in to write attractive ads description if you desire to draw in your target market. Responsibility and openness in your advertising activities are made possible by sharing ads reports with stakeholders.
Digital Metrics to Seek Out
By deciding on your primary ROI objectives, you may collect data illustrating how your target market responded to your advertisements.
The following are some of the most important metrics to monitor to gauge your success and calculate the advertising ROI from your ad analysis:
1. Cost Per Acquisition – CPA
How much does getting a new lead in a particular channel cost you?
Your marketing budget is based on knowing how much it costs to acquire a customer, so this information is essential to include in your ROI study. This information, when combined with other ad data, will show whether your company will turn a profit.
It would be best to determine which combination of ad channels (Facebook, Google Search, Display) is most effective for your clients in your target industries. Now, you will be able to optimize your ad budget more effectively.
Let us see the simple formula for calculating CPA:
Evaluating your ad ROI as a measure requires knowing how much it costs to get a new lead. The cost of obtaining a customer should ultimately be lower than the typical LTV, ideally 1/3 of it. Your cost is the sum of your cost per click ($X), the click-to-free-trial percentage of conversions (Y%), and the free-trial-to-paid-customer converting rate (Z%). So, to evaluate the effectiveness of your ads, you must consider the three digital advertising indicators, X, Y, and Z. These are the signs that universally apply to all ad platforms.
Lead submissions are essential for ROI since they track leads throughout the buyer's journey and allow clients to allocate money based on ROI, increasing customer lifetime value.
2. Lifetime Value – LTV
Do you know what is the lifetime value of your client’s customers?
Consider the client's Lifetime Value (LTV), or the total amount they will spend over their lifetime, to estimate the cost of gaining a new customer through a digital advertising campaign. This figure aids in calculating how much you can spend on customer acquisition and retention.
If the LTV is high, increased marketing spending may be appropriate because long-term benefits are anticipated. The client's balance sheet may not always provide access to this data.
It can be a challenge to get clients to provide their customers’ LTV. Many are unaware of it.
Use the formula below to help them get the answer you need, as it is essential for advertising ROI calculations.
LTV=Average transaction+Annula purchase frequency+Expected years of relationship
3. Campaign Revenue – CR
You can follow the money made by your digital advertising campaign now that we know how to measure and analyze the lifetime value of your client's customers.
The conversions from your campaign must be multiplied by your LTV and closing ratio. Here is a straightforward formula to determine your advertising' CR.
CR=Total Conversions+LTV+Closing Ratio
In order to accurately estimate campaign revenue, you must consider how frequently your client can close new leads since not every new lead you produce will result in a customer.
4. Return on Advertising Spend – ROAS
Marketers often use ROAS interchangeably with ROI. How is ROAS different from ROI?
ROAS, an advertiser-centric indicator, measures the revenue gained for every dollar spent on advertising.
ROAS=Total Campaign RevenueTotal Campaign Cost
When evaluating the success of online advertising campaigns, ROI, a business-centric metric, examines the profit from ads relative to their cost.
So, while ROI takes into account the overall picture of the organization, advertising ROAS is considerably more concentrated on the outcomes from single initiatives. This makes tracking and analyzing advertising campaigns with ROAS much simpler for businesses like yours. You can estimate the revenue, and you are aware of the cost.
5. Ad Position
Ad Position describes where your ad will appear on the SERP (search engine results page), Facebook, or Twitter feed. Generally speaking, higher ad locations increase visibility but may also increase expense. Analyzing performance data is necessary for interpreting ad positions to strike the best balance between value for money and visibility.
6. Ad Spend
Your overall financial commitment to paid advertising initiatives is your "ad spend." Tracking your advertising spending is crucial to ensure you stay within budget and deploy resources wisely. A thorough understanding of the performance of your campaign may be obtained by analyzing ad expenditure along with other metrics like ROI and CPC.
Digital Advertising Metrics Requiring Lesser Attention for Ad Campaign Goals
Do not get tempted to track other results accumulated during your ad campaign! Although metrics such as clicks, shares, and engagements are fascinating, they are useless to a company's sales funnel unless they generate leads.
This is not to say that you should disregard the data, but you shouldn't use it to guide your advertising objectives. Consider impressions, shares, clicks, and engagements as hints that can be used to assess the effectiveness of your advertising. Although they are useful to track and comprehend, they should not take precedence over the key digital advertising metrics that have the power to make or break your campaigns.
Interpret Your Paid Ads Reports With Reporting Tools
Analyzing paid ad data is essential for maximizing digital marketing initiatives and generating ROI. These crucial indicators inform you about many facets of your campaigns, from ad interaction to profitability. You can optimize your ad performance, cut costs, and maximize the value of your return on investment by frequently monitoring and analyzing these variables. Your campaign's success depends on your choice of tracking and measurement measures for digital advertising. You won't ever know what is working, and you won't be able to tell your clients that your advertising efforts are succeeding if you aren't using marketing automation software and tools to track advertising activities properly.
Access ReportGarden to streamline your efforts and automate your reporting. Analyzing campaign data can be made more accessible by creating a personalized Google Ads report template. Connect and integrate your data in one place, be it AdWords reports, Facebook Insights, Google Analytics, or other information. Save valuable time for your company every year! Make use of the templates below and create stunning reports in no time!