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Breaking Down Key KPIs

Do you ever think that digital marketers are speaking in code?

While they aren’t speaking some secret language or Morse Code 2.0, it can be confusing when digital marketers start using acronyms and shortcuts for terms that you have never heard before. 

Especially when it comes to KPIs – er – key performance indicators.

While key performance indicators (KPIs) are not unique to digital marketing, we do talk about them a lot. For good reason.

For those who don’t know, a key performance indicator is a measurable value that demonstrates how effectively a company is achieving key business objectives.

In other words, it is simply a type of performance measurement.

And the reason they are so important is that having measurable outcomes and measuring results is crucial for digital marketing success and business growth.

Now your question might be, what are the important KPIs for digital marketing? What do all the letters and coding (ROI, CTR, etc.) stand for and actually measure? While we can’t cover every single possible KPI out there, we’re going to highlight some of the key ones for digital marketing and breakdown each one.

Key KPIs

Impressions 

An impression is simply a view. Whether it be a search or display ad, impressions are the total number of unique views on your ad. 

Clicks

 A click is someone who takes action beyond the impression. Every paid media conversion starts with a click.

The KPI ‘click’ measures how many people clicked your ad after viewing it. Therefore, clicks tend to be less than impressions as not everyone who views decides to take action by clicking.

Visits

Visits is a pretty self-explanatory KPI, it’s how many people visited your site. This can be a good indicator of general web traffic or perhaps more specific if from a distinct campaign whose call-to-action (CTA) was to visit the site. 

Conversions

 A conversion occurs when someone completes a desired goal. This could be from an ad campaign, an email sequence or coming to your website and completing that action. 

The cool thing with conversions is that they are a key indicator of how your business or campaign is doing because it’s people taking action you are asking of them through your CTA. Conversions could be any number of actions such as filling out a form, emailing or calling you, making a purchase, or downloading some freebee in return for their email. The options are endless!

Click Through Rate (CTR)

Click through rate is the ratio of users who click on a specific link on a page, email, advertisement, etc. to the number of total users who view that page, email, or advertisement. It measures the percentage of people who take the action of clicking after viewing a digital asset out of the total number that viewed that asset.

CTR = Clicks / Impressions

 Conversion Rate (CVR)

Conversion Rate is one of the biggest indicators of campaign success. This metric looks at the total people who clicked and finds the percentage that converted (took a specific action requested). In other words, the percentage of people who successfully completed a desired action you wanted to get from them.

 Conversion Rate = Conversions / Total Clicks

Cost Per Click (CPC)

Marketing actions cost money and unsurprisingly, the above metrics have a cost to them. Let’s start with clicks. Cost per Click is just as it sounds – the cost for a single click. This helps paid media advertisers know how much they can pay for an ad based on a set campaign budget. This doesn’t always mean they will pay a specific amount though as it does depend on many factors.

CPC measures exactly how much an advertiser has paid for one click. You could multiply that number by total clicks to check the cost of your campaign.

Cost Per Click = Total Cost of Campaign / # of Times Ad was Clicked in that Campaign

Cost Per Acquisition (CPA)

Acquisition is the same term as conversion (referenced above). So, cost per acquisition (CPA) is the cost you pay for one conversion (whatever your conversion ends up being). Google defines average CPA as the price advertisers pay for every new customer they acquire.

 Cost Per Acquisition = Total Cost of Conversions / # of Conversions

Customer Lifetime Value (CLV)

You spend money to acquire new customers and retain them, so don’t you want to know the value you are receiving back in return? That’s Customer Lifetime Value (CLV)! CLV (also known as lifetime value) is a predication of the net profit attributed to the entire future relationship with a future customer. In other words, the total revenue a business can reasonably expect from a single customer account.

The calculation for CLV can be a bit tricky and in-depth, involving other metrics. This post goes into more detail than we will in case you’re interested.

Customer Value = Average Purchase Value x Average Purchase Frequency Rate

Customer Lifetime Value = Customer Value x Average Customer Lifespan

OR

Customer Lifetime Value = (Average sale per customer) x (Average number of times a customer buys per year) x (Average retention time in months or years for a typical customer)

Now your next question might be, which KPIs are the most important? And that’s a valid question; however, one that does not have an exact answer. The reason being that it truly depends on your business model, your marketing plan and activities, and the goals you’re trying to achieve.

While it does depend on many factors, there are some basic measurements you can follow based on what your goals might be. Those breakdowns are found below.

Email

For an email campaign, the following are the most measured metrics: 

  • Open rate (# of people who open the email / # who received the email)
  • Click Through Rate (CTR)
  • Conversion Rate
Paid Media

For Paid Media campaign or ads, the following are the most measured metrics:

  • Impressions
  • Clicks
  • Click Through Rate (CTR)
  • Conversion Rate
  • Cost Per Click
  • Cost Per Acquisition
 Website Effectiveness

To measure the effectiveness of your website, the following are the most commonly used metrics:

  • Visits
  • Conversion Rate
Profitability of the Business

 The following are the most commonly used metrics to measure the future profitability your business:

  • Cost Per Acquisition
  • Customer Lifetime Value
  • Possibly Conversion Rate

In conclusion, no matter which KPIs you decide to utilize, it’s important to measure your digital outcomes to be able to adjust and build a strong marketing plan. If you need help measuring some of these outcomes or getting desired results from any of these digital marketing campaigns, let us help! At Steadfast Results, we’re here to get real, measured results so that you can grow your business!