Marketing managers have a lot of work cut out for them in their quest to reach out to more customers and bolster their company’s online presence. They need to invest heavily in online marketing and leverage the different ways of generating the desired results. However, the managers should have a firm understanding of different online marketing metrics to effectively analyze campaign performances. In this extensive guide, we will talk about the four most crucial online marketing metrics, i.e., CPC, CPL, CTR, and CPM. Let’s cut to the chase and discuss them in detail, shall we?
Cost Per Click (CPC)
Alternatively known as pay per click, CPC is arguably the most widely used online marketing method to drive traffic to websites. This online marketing metric helps website owners generate an income from the advertisers every time a user clicks on the ad. It is the oldest online marketing performance metric and is sometimes regarded as the budget spent on generating clicks on an advertisement.
One of the most common questions asked by marketing managers is the overall cost of using the CPC model. Well, the cost related to the metric depends on your monthly budget and the maximum cost to be spent on the shortlisted target keywords. Here is the formula to calculate Cost Per Click:
CPC = CPM/CTR
For example, a website offering a CPC of €0.10 will cost you €10 for every 100 clicks made on your advertisement. Although a very simple online marketing method, CPC or Cost Per Click has quite a significant role to play in determining the financial success of most paid search campaigns.
The metric allows marketing managers to conduct an in-depth campaign analysis and figure out how much their ads are costing them. CPC gives you an idea about their ROI (Return on Investment) — helping them know whether or not they can afford to run the campaign.
CPC is a metric that helps us know whether or not we are overpaying for an intended action. We highly recommend that marketing managers consider cost per click by taking the value and cost of the advertisement into account.
Cost Per Lead (CPL)
Moving on to the next online advertising metric, which is Cost Per Lead or CPL. This advertising metric is preferred mostly by organizations that are more interested in lead generation. They spend a majority of their marketing budget on making their target audience click on ads and fill out a small form. This marketing metric is irrelevant for branding campaigns that run without a signup/CTA.
The desired action can differ from company to company. However, the focus is generally on driving qualified leads towards a landing page and performing the desired action. The advertisers will have to pay for each lead generated through the marketing campaign. In other words, they will have to agree to CPL.
CPL and CPA are two online marketing metrics that are used interchangeably. CPA (Cost Per Action) is relevant when the goal is not to generate a lead, but to encourage an action. However, for the sake of this article, we will use CPL as it is considered more specific. So, how can you measure the CPL? Marketing managers can use different ways to calculate CPL. We suggest a straightforward calculation where we simply divide the total price of a campaign by the number of conversions generated.
For example, if a marketing manager spends €500 for an advertisement and successfully generates ten clicks out of it, the cost per lead will be €50. To be honest, one should focus on the source and quality of leads instead of obsessing with their price.
The cost is a small factor since you might have to determine the best source of leads and adjust your marketing budget accordingly. Most companies believe in asking the leads how they got to know about them. This strategy is quite useful in recording and tracking the campaign performance.
We believe that CPL is as crucial for business success as other marketing metrics like CPM, CTR, and CPC. The reason is that the marketing metric focuses on generating results, i.e., the overall improvement in business activity, especially sales. The company can use CPL to calculate the return on investment and compare the value of their business.
Cost Per Lead, however, varies quite dramatically in the case of small and new businesses. Although you will notice that a CPL-led marketing campaign on some platforms will produce much higher results at the beginning of a campaign, the CPL largely depends on factors like audience, brand reputation, product, and more.
Click-Through Rate (CTR)
Click-Through Rate, as the name suggests, is the rate at which your ads are clicked through. In other words, it is essentially the percentage of online users that land on a website, engage with the ads on it, and click on them! This online marketing metric is quite popular among marketing managers that wish to analyze the ability of an advertisement to generate engagement.
Ideally, an advertisement that captures the imagination of a target audience usually has a high CTR. A high Click-Through Rate is quite helpful for marketers in an organization since it supports their decision to invest more advertising capital on their business website. What is a typical CTR in 2022? The CTR varies greatly from platform to platform — banner ads on news websites often see a CTR of around 0.05%, Linkedin 0.4-0.8%, Google Search ads 2-20%, and so on.
How can you calculate CTR? Click-Through Rate is the percentage of individuals that click on an ad. The formula to calculate CTR is quite straightforward:
Click-Through Rate = (Total Clicks on Ad) / (Total impressions) x 100
This online marketing metric helps marketing managers measure the advertisement’s effectiveness. For example, if your advertisement generates one click for every 1000 impressions, your CTR is 0.1 percent. We suggest you double down on CTR to determine the ad performance. Use the formula above to calculate the CTR and generate detailed insights and deeper knowledge about the effectiveness of your ad campaign.
We highly recommend CTR as a go-to online marketing metric because it helps evaluate the call to action and ad copy. It reflects the quality of your ad and helps determine if the audience matches your ad campaign. It helps reach out to the online users that are potential customers while enhancing the overall Quality Score of your ad campaign. Not just that, you can use the metric to compare ad performance with that of your competitors while running the campaign.
Cost Per Thousand (CPM)
Lastly, we have the CPM or Cost Per Thousand. Some might also refer to it as Cost Per Mille. This online marketing metric helps calculate the cost advertisers have to pay for every 1000 impressions on a particular advertisement. It is quite an extraordinary online advertising metric since the advertisers have no compulsion to generate clicks on an ad. Marketing managers only have to generate views to render their ad campaign a success.
CPM is a marketing metric that relies heavily on how much competition there is for a particular segment or niche. The higher the competition, the higher will be the CPM.
The more the ad gets shown on a website, the better will be the campaign’s performance. An impression is counted every time an online user landing on a website views the ad. The overall cost of the campaign is decided for every 1000 impressions. To put it in simple words, advertisers are paying for 1000 impressions in order to reach 1000 users (ideally) through a website or other online medium. Here’s the formula to calculate CPM –
CPM = Cost x 1000 / Target Audience
Cost Per Thousand or CPM is arguably one of the best ways to analyze an ad campaign’s profitability and cost-effectiveness. It is a marketing metric that also works on other media sources like radio and television. Here, the metric helps analyze and estimate the total listenership and viewership for a particular medium.
No matter which online marketing metric you go for, you will always have to consider factors like audience, marketing platform, time of the year, and more. The online marketing metrics mentioned above vary dramatically due to such factors. Regardless, we suggest you go for CTR as it is a very crucial parameter to check whether or not your advertisements resonate with the target audience. This is because your potential clients can influence CTR, which can impact your campaigns’ CPC and CPL. Did you find this guide helpful? Let us know in the comments. Also, don’t forget to check out other informative posts on the blog!