The Ad Campaign Numbers That Count
Online ad campaigns are another great source of numbers that can be baffling and overwhelming if you don't understand what they mean. First of all you have to know the pricing structure of the campaign. The three most common paid advertising models are:
· CPA (cost per action) where the user pays per action which can be a sale, a download, a lead etc;
· CPC (cost per click) where the advertiser only pays when a user clicks on the ad;
· CPM (cost per thousand impressions) where the advertiser buys ad space based upon the number of ad impressions that are exposed, rather than on clicks.
Next, your campaign goes live. The supplier should then provide you with some sort of online tracking, preferably in real-time. This should give you the number of impressions, clicks and/or actions and the CTR (clickthrough rate) which is the percentage of viewers who click on a viewed advertisement. Traditionally this last number is the most popular metric used to judge the success of an advertising campaign. As the amount of advertising online has increased and users have been less inclined to click, average CTRs now fall well under 0.50%.
Very sophisticated tracking also allows you to determine which campaign elements (like an individual ad or an individual term on a pay-per-click search engine) are actually turning into desired actions like sales or subscriptions and can even calculate return on investment if given complete information. These kind of tracking solutions are often ones the advertisers have to implement themselves like HyperTracker or ProAnalyzer.
Because online ad campaigns have the ability to provide these numbers while a campaign is live, the attentive advertiser can instantly judge the successes and failures of such campaigns and make adjustments to creative and placements (if the supplier inventory allows) on the fly. This is a very powerful combination that allows you to get the best deal possible for your advertising dollar.
The Sales Numbers That Count
Well, of course, all sales numbers count. It's what keeps you in business. But what sales numbers give you meaningful data about how your site is performing and where it can improve? The basic numbers to keep an eye on are the same whether your business is online or off:
· Gross sales - Your total sales before any adjustments.
· Net sales - Equal gross sales minus discounts, returns, allowances, and any other adjustments.
· Marketing costs - Expenses for marketing your site online, including any related to the development and upkeep of your website.
Put Them All Together…
When you combine the numbers from your web logs with the numbers from your ad campaigns and the numbers from your online sales you get everything you need to determine your return on investment and website effectiveness. These powerful metrics should be noted monthly and annually. They include:
· Visitor acquisition cost - Measures the effectiveness of your online marketing efforts. Divide your website and marketing expenses by the number of unique visitors.
· Customer acquisition cost - Measures the cost of acquiring a new customer. Divide your website and marketing expenses by the number of unique buyers.
· Website conversion rate - Measures the website's effectiveness for sales/lead generation. In general this is the percentage of visitors to a website who complete a desired action (i.e. sales, sign ups, subscriptions). Divide the number of these actions by the number of unique visitors and express as a percentage.
· Advertising conversion rate - Measures ad campaign's effectiveness for sales/lead generation. Divide the number of sales and leads by the number of unique clicks from a particular ad or campaign and express as a percentage.
· Average revenue per sale - Measures average gross cash value of individual sales. Divide dollar value of sales made through the website by total number of sales.
· Average revenue per visitor - Measures average gross cash value of individual visitors. Divide dollar value of sales made through the website by number of unique visitors.
· Customer retention rate - Measures percentage of unique buyers who buy from you again. Divide number of repeat buyers by unique buyers and express as a percentage.
· Website penetration rate - Measures the ability of your site to draw people in. This is determined by taking the number of visits to your homepage, dividing it by the total number of visits to the other pages of your site and then expressing this as a percentage.
Doing business online is a numbers game. Make sure you find the right numbers for your business and then take action. Knowledge is only power if it is acted upon.
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Did you know?
Bricks and mortar stores still outpace online vendors when it comes to converting browsers to buyers. The offline world enjoys an average conversion rate of 48%. The leader of the online pack, Amazon.com converts at the rate of 15% but most ecommerce sites convert visitors to buyers at the rate of 1.8% (which is not much different from direct mail, catalogue promotions or other types of direct marketing).
Source: Shop.org
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eMage Sites of the Month
The Ad-Tracking Guide
Overview and reviews of different tracking solutions for online ad campaigns.
Audience Measurement and Campaign Reporting Audit Guidelines
Informative report in PDF format from the Interactive Advertising Bureau.
ROI Marketing
Many articles on improving conversion and retention rates from industry leader Clickz.
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eMage Tip of the Month
Besides quantitative numbers, the Internet is also one of the easiest ways to generate qualitative numbers through focus groups, usability testing, and email feedback. To learn more about this aspect of eMarketing research, check out this extensive two part lesson from the Terra Lycos Network's WebMonkey: http://hotwired.lycos.com/webmonkey/99/18/index3a.html
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