How To Successfully Identify Your Advertising KPIs

Key Performance Indicators (KPIs) are visual performance measurements that demonstrate how well a company is achieving its key business objectives. These key indicators can largely vary from one business to another. In simple terms, a KPI is a metric that represents important performance indicators for your website in relation to a given goal. Having good advertising KPIs will help ensure your business objectives.

Before defining your advertising KPIs, it is important to set your business’ goals; these goals must align with your business’ internal and external strategies, core values and mission. These should be measurable, relevant and defined in a timely manner. Once these goals have been defined, it will be much easier for you to determine your business’ KPIs, and successfully track all your Digital Marketing efforts, may it be Social Media, Search Engine Optimization (SEO), or Digital Advertising.

Businesses usually have several realistic and measurable KPIs that they track in order to attain their goals. Once these KPIs have been determined, it's important to track their success rate. Here's how to determine the right KPIs for you, and then track them!

How to determine and calculate your advertising KPIs

To define your advertising KPIs, you must first start by determining your business’ goals.

Business goals are in most cases:

• Increasing sales;
• Getting new leads in the sales pipeline;
• Getting more website traffic;
• Increasing brand awareness;
• Reducing customer service cost;
• Improving customer satisfaction;
• Improving customer retention and loyalty.

To help determine a clear business goal, it can be very useful to apply the SMART methodology (Specific, Measurable, Actionable, Realistic, and Time Frame). So instead of just saying: I want to increase sales, you can say your goal is to increase the number of sales made on your e-commerce website by 10% before the end of the year.

Once your goal is set, it's time to find the right KPI to measure it.

Here’s an example of an advertising KPI you can set for your e-commerce

Let's say you have an e-commerce; you buy a specific product for $100, then sell it for $200. This means you can only afford to use $99,99 in marketing, shipping, and handling for that product before the business becomes unprofitable.

Whenever that product is sold, you only want to invest up to $50 on Marketing for it, to have a $50 profit.

This means, for every dollar you spend on Digital Marketing, you want $4 back in revenue. If you work with Pay Per Clicks (PPC) (Google Ads, Facebook, etc.), this will determine your Return On Ad Spend (ROAS) as 400%. In this case, the ROAS could be an excellent advertising KPI if you have a B2C e-commerce.

Other advertising KPIs you could track in this case could be the cost of goods sold through your online store, the click-through rate on your ads, or the conversion rate of visitors turned into sales.

ROI and ROAS: what are they?

ROI (Return on Investment) and ROAS (Return on Ad Spend) are KPIs used to measure the business value of your marketing and advertising initiatives and activities.

Return on Investment:

The equation for ROI is:

ROI = Benefits – costs x 100 divided by your costs.

ROI calculations are a way to provide numbers for the benefit that an activity is bringing to the company, the costs and investments that are tied to it. ROI for an online shop might be that the shop sells a given number of transactions, and the transactions would be the metric or the key performance indicator.

The ROI derives from looking at the benefits of an activity such as driving an online community versus spending your money on ads. The benefits could be a reduced cost of customer services, or converting calls to social interactions. An increase in customer satisfaction combined with reduced costs should yield a satisfying ROI percentage.

Return on Ad Spending:

The formula for ROAS is quite simple:

Revenue / Cost = ROAS

You simply divide the revenue that is produced by digital advertising, by the amount spent on that particular online advertising to get your ROAS.

The ROAS should always be based on the profit of the given products. One can work with several target ROAS if the profits are different from product to product.  

Other Advertising KPIs you could track

Depending on your goals, there is a multitude of other digital advertising KPIs you can track for your business:

• Customer Acquisition Cost (CAC);
• Customer lifetime value;
• Bounce rate on your landing pages;
• Number of qualified leads;
• Cost per lead;
• Lead conversion rate;
• Total sales revenue or Total revenue;
• Average customer spend;
• Page conversion rate.

These are all important KPIs you can track to get a better understanding of your campaign performance and overall marketing performances on your various marketing channels.

Track your advertising KPIs 

It can be hard to determine and track your KPIs every day. This is when an automated reporting tool that can fetch data from all your systems (Analytics, Search Console, Facebook, LinkedIn, etc.) comes in handy.

A marketing reporting tool enables you to create KPI dashboards with all your business metrics so that you can have a better understanding of your progress at a glance. You could even put it on a screen in your office, so everyone can see the business’ performance, which is great motivation!

DashThis can definitely help you with this since the software can import data from various sources and combine them in good looking graphs and diagrams. You can have social media marketing reports, digital marketing KPIs reports, e-commerce reports, PPC reports, and much more.