Pay-per-click (PPC) advertising is an effective online marketing strategy, especially for ecommerce stores. With a high ROI and a pay-per-click model, PPC continues to grow in popularity for online businesses.
The average PPC ROI is 200%, but this can vary based on individual strategies. This article covers the importance of tracking PPC ROI to measure campaign effectiveness and optimize spending.
Key Metrics for Tracking PPC ROI
There are several key metrics that go into effective PPC ROI tracking—Cost-Per-Click (CPC), Click-Through Rate (CTR), Conversion Rate, Cost-Per-Acquisition (CPA), and Return on Ad Spend (ROAS).
- Cost-Per-Click (CPC): CPC is the amount an advertiser pays each time a user clicks on their ad. This number is determined by dividing the total cost of the campaign by the number of clicks received. This calculation is useful for understanding how effectively the ad budget is being used and helps in optimizing spending across various campaigns or keywords.
- Click-Through Rate (CTR): CTR shows the percentage of people who click on an ad after they see it. It is calculated by dividing the number of clicks by the number of impressions and multiplying by 100. This is how you measure how well your advertising campaign is doing. It also influences the quality score on platforms like Google Ads. Usually, CTRs are around 0.2%, or 2 clicks per 1,000 impressions.
- Conversion Rate: The conversion rate shows how many visitors take a specific action—like making a purchase or signing up—compared to the total number of people who visit. This percentage helps you determine how well your marketing campaign is working to encourage those actions. It also highlights where improvements can be made and can help you make better decisions about future marketing strategies.
- Cost-Per-Acquisition (CPA): CPA represents the average cost of getting a new customer or making a conversion from your ads. You can find this number by taking the total expenses of a campaign and dividing that by the number of conversions you achieved. This metric helps you understand how profitable your marketing strategies are and is useful for performance-based advertising models.
- Return on Ad Spend (ROAS): (ROAS) is helpful for figuring out ROI and allows you to focus on the exact return you earned from your PPC ads. ROI calculations involve factors such as employee salaries, customer service expenses, and other costs. ROAS can be determined by subtracting the PPC cost from the PPC revenue and dividing it by the PPC cost. When you multiply that number by 100, it will give you the percentage of how much profit you made for every dollar spent on advertising.
Tracking & Reporting Tools
Using built-in analytics tools and Google Analytics for thorough data analysis is one of the best things you can do for your PPC campaigns. These tools quickly provide you with information such as data on impressions, clicks, click-through rates, conversions, and ROAS. They also include other real-time performance tracking, tools for A/B testing, and can be used to predict future information about performance or revenue.
You can use analytics tools to get an even deeper understanding of the customer journey by using a CRM. This is a popular choice for many businesses today. These CRM tools are used to make better decisions about bidding strategies, create better targeted ad messaging based on user activity trends, and improve future campaigns.
Calculating and Analyzing ROI
PPC ROI can be calculated by subtracting the campaign cost from the revenue generated and then dividing that number by the campaign cost. You can then multiply this number by 100 to get the ROI percentage.
In formula form, this looks like:
ROI (%) = ((Revenue Generated – Campaign Cost) / Campaign Cost) x 100
For example, if you had a campaign that cost $5,000 to run and generated a revenue of $20,000, you would get a ROI of 300%. This number would reflect how much money you ended up with compared to what was initially invested.
A positive ROI (over 100%) shows that the campaign is making a profit because the revenue is greater than the expenses. On the other hand, a negative ROI (under 100%) means the campaign is not doing well and is actually losing money. You will want to set a goal for what this percentage should be ahead of time so that when you do get that final [percentage, you can determine if your campaign is as effective as you had hoped or if you need to make changes.
Optimizing Campaigns for Better ROI
Improving your PPC ads is more than about tracking numbers. You also have to know how to apply those numbers. Some additional factors to consider for increasing your ROI include keyword research, ad copy optimization, landing page optimization, and budget allocation.
Keyword Research
One of the most common focuses of PPC is keyword research. Data analysis can be used to determine which keywords may work most successfully for your campaign. This includes identifying high-performing and long-tail keywords that align with the message you are trying to get across. It can also be helpful to use competitor keyword analysis to find new opportunities based on what has worked well for your competition. This is a common practice that businesses use to fill gaps in their strategy.
You should also make sure to regularly review and update your own keyword list based on new performance metrics after the campaign has already been launched. This might include removing redundant keywords and focusing on those with better search volumes and relevance.
Ad Copy Optimization
Although it may not be as long as the copy is on your web pages themselves, PPC ad copy is just as important. Since this copy should be able to attract clicks in a concise message, your ad copy should be compelling and focus on benefits rather than features. PPC ads should also always end with a strong call-to-action (CTA) that persuades the user to make a conversion. If you are unsure of your copy or just want to make general improvements, A/B testing is a great way to compare different versions of your ads, experiment with different headlines, and test other areas of your copy.
Landing Page Optimization
Nobody wants to click on an ad and be redirected to an unrelated web page. This is why it is important to make sure your landing page content aligns with your ad messaging. Having a well-aligned message will improve your overall quality score and create a better user experience. This includes key elements such as having a compelling headline, trust signals, and a clear value proposition. It is also important to make sure your page has good load speed and includes a mobile-responsive design so that users will have a positive experience no matter what device they are entering the website from.
Budget Allocation
Budgeting is essential for PPC campaigns. Consider your daily budget, total campaign budget, and individual bid budgets. Some experts recommend starting with a budget that generates 150–200 clicks per week based on your average CPC. Repeat this process for a month to better understand the market and adapt to emerging trends. Tools like Google Smart Bidding can also assist with budget management.
Boost PPC Performance
Tracking PPC ROI is crucial for successful campaigns. ROI reflects campaign effectiveness and ensures wise spending. Metrics like CPC, CTR, conversion rate, CPA, and ROAS help measure performance and identify areas for improvement. You can further improve ROI by using additional tools to track data, refine keywords, create effective copy, and set appropriate budgets.
These tools help businesses make data-driven decisions and maximize PPC ad performance. Explore Simpler Strategies’ PPC management services to fill any gaps in your strategy.
