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PPC Back-To-Basics – Understanding Key Performance Indicators

You decided pay-per-click advertising is for you, you thought of a logical account structure ( our colleague Ping Jen explained that a good account structure is the thing all high performing accounts have in common), you set up your campaign, you found the right keywords for your business, enhanced performance by adding negative keywords and by some writing Pulitzer prize worthy ad copy which is -all in all- quite a bit of work.

Like in other fields of business you probably want to know if your work is paying off and if you are receiving a return on investment. Judging this can seem a hard nut to crack to someone new to PPC. However this is a form of advertising which is highly measurable and the way to look at it is in essence not much different as how you’d go about this in general in business. In this blog post we’ll outline the key performance indicators (KPIs) and explain why they are important – we also share a checklist to help you improve KPIs. We’ll go more in-depth on the last topic in the near future.

PPC Key Performance Indicators

There are six main KPIs which can help you establish the success of your work:

1. Click through rate (CTR): The number of times an ad was clicked (counted when an add is clicked.) , divided by the number of times the ad was shown (impressions). For example, if your ads had 50 clicks out of 2,348 impressions, your CTR is 2.13%.

2. Average (Ad) position: The average position of the ad on a webpage. If your average ad position is somewhere on page 3 or lower, customers are far less likely to see it. To boost ad position, try increasing your keyword bids, for example, and targeting customers with incremental bids.

3. Average cost per click (CPC) The total cost of all clicks on an ad divided by the number of clicks. This is the average amount you're actually charged each time your ad is clicked. For example, if you paid a total of $48.35 for 300 clicks, your average CPC is $0.16. Average CPC can help you determine if you're getting a good return on investment (ROI). How you define a reasonable CPC can depend in part of what you consider to be an acceptable ROI. The average CPC for Bing Ads is around $0.84, though yours could be significantly higher or lower based on your business type and ROI goals.Your budget is closely connected to an acceptable CPC. For example, you need to lower your CPC if it's depleting your budget too quickly. If you often have budget left over, you might have room for a higher CPC. If CPC isn't what you want or expect, review your bid prices and CPC as compared to your average ad position, and adjust your keyword bids as needed.

4. Conversions: A conversion is the completion of an action by a customer after viewing your ad. The action could be purchasing your product, registering for your webinar, joining an organization - whatever you consider the best measure of the ad's success. Along with conversion rate, conversions are available when you turn on conversion tracking. If your ad has a good CTR but few conversions, you are paying for ads that aren't bringing you revenue. Try improving your landing page by making the content easy to read and putting your purchase offer near the top of the page.

5. Conversion rate: The number of conversions, divided by the total number of clicks. For example, if the ads in your campaign got 300 clicks and four conversions, the conversion rate is 1.33%. Along with conversions, conversion rate is available when you turn on conversion tracking. The higher your conversion rate, the better your campaign and its ads are performing. A good conversion rate is generally between 2% and 3%. If it's consistently lower than this, consider improving your landing page by making sure it's well-organized, interesting, easy to use, and relevant to what your customers searched for.

6. Impressions: Impressions are the number of times an ad has been displayed on search results pages. Without impressions there are no clicks or conversions. You should monitor and adjust impressions in the context of the preceding statistics. For example, if your CTR is low, it could be because of low impressions (or you could receive too many impressions and no clicks) so don’t look at impressions in isolation.

How to obtain your PPC campaign’s KPIs

The next thing you wonder of course is how you actually obtain this information for your campaign. I’d recommend having a look at this article about creating a performance report. We’ll dedicate a special blog post to reporting but know that you can customize your report to whatever KPIs you’d like to see and you can also separate them by device. You can also schedule reports so that – once you’re happy with your set up – you receive regular updates when you want them.

Looking ahead: optimising your KPIs

As this is a back-to-basic series I’d like to keep each post simple –trying to at least- but I can hear you think ‘but if I don’t quite like my KPIs, what can I do to improve them?’ We’ll dedicate a PPC Back to Basics blog post to this and you can read up on this in our training area. I also have the below check list which is not exhaustive (as new functionality rolls out often and this check list stood the test of some time) but I reckon it will do fine when you want to start optimising bits and pieces and just want to get your head around some top things to check.

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Do share with other readers of the blog what KPIs you check, what reporting works well for you and what optimisations have worked well for your campaigns..

Find other posts in the PPC Back to Basic series: