For marketers looking to maximize their budget and drive tangible results, tracking the success of performance marketing efforts is essential. Whether it’s website traffic and conversions or return on ad spend (ROAS) that matters most to you, knowing how and what to track is vital for ensuring that money isn’t wasted on the wrong marketing strategy.
8 Performance Marketing Metrics to Measure the Effectiveness of Your Campaigns
1. Click-ThroughRate (CTR)
When you’re running digital advertising campaigns, knowing how many clicks you’re getting to your ads, or even from search engine results, is critical for understanding success. Your click-through rate, or CTR, can be calculated by dividing the total number of clicks by the number of impressions received for that ad, then multiplying by 100 to get a percentage.
Many ad platforms calculate the CTR for you, but it’s still important to keep track of these numbers over time to determine how successful your ads are. The higher your CTR, the more appealing your ad is. For instance, a carousel ad on Facebook could have been shown 2,500 times and received 85 clicks. The CTR for this ad would be 3.4%.
85 ÷ 2,500 = 0.034
0.034 x 100 = 3.4
2. Cost-Per-Click (CPC)
CPC is a measure of how much each click to your ad is costing you. Every unique audience member who clicks on your ad is considered as one click. To calculate CPC, you need to divide your total ad spend for that ad set by the number of clicks the ad set received. You can do this on a campaign level or per ad level, depending on how broad or granular you want to be. For instance, a campaign that cost $500 to run that had 1,000 clicks would have a CPC of $0.50.
500 ÷ 1,000 = 0.5
3. Conversion Rate
Your conversion rate reflects how engaging your performance marketing campaign is, whether that’s a direct sale, someone signing up for a newsletter, or any other conversion you’re tracking. The higher your conversion rate, the more your marketing is resonating with your audience.
To calculate your conversion rate, you need to divide your total number of conversions for that ad by the total number of visitors to your site as a result of the same ad. Multiplying this by 100 will give you the conversion rate as a percentage. An example of this would be a site that sells 70 of its advertised products after 400 visitors clicked on the ad. The conversion rate on this ad would be 17.5%.
70 ÷ 400 = 0.175
0.175 x 100 = 17.5
Like CPC, conversion rate is often tracked automatically in many advertising platforms, like Meta Business Manager.
4. Return on Investment (ROI)
The ROI of any marketing strategy is critical to know. This number helps you determine what your actual costs were versus the money you spent on marketing through the specific channel you’re tracking.
You can calculate your ROI by subtracting your marketing efforts from the revenue they generated. Then, divide that number by the total cost of your marketing before multiplying by 100. For instance, a social media ad campaign that cost $5,000 to run and generated $8,000 in revenue would have an ROI of 60%.
8,000 – 5,000 = 3,000
3,000 ÷ 5,000 = 0.6
0.6 x 100 = 60
5. Return on Ad Spend (ROAS)
While ROI covers all returns on any type of marketing, ROAS is solely focused on paid advertising campaigns. Like ROI, this metric is calculated by dividing the total revenue from ads by the total ad spend, then multiplying by 100. For instance, an ad campaign with $500 in revenue, which cost $250 to run, would have a ROAS of 200%.
500 ÷ 250 = 2
2 x 100 = 200
6. Customer Acquisition Cost (CAC)
Much like cost per lead, this metric tracks how much money it takes to acquire a new customer. The difference between these two is that with leads, they won’t all become customers, whereas CAC tracks only those who do become customers.
To calculate customer acquisition cost, divide the total of all marketing and sales efforts over a specific time period by the number of new customers that were brought in during that same time. An example of this would be marketing and sales over a three-month window costing $10,000. If 150 new customers were brought into the business during that time, the cost per acquisition would be $66.67.
10,000 ÷ 150 = 66.67
7. Customer Retention Rate (CRR)
For most businesses, it’s more costly to bring in new customers than it is to retain the current ones. CRR tracks the number of existing customers your business keeps during a given time. Retention rate can be compared as new versus returning customers and help you determine how good your company’s customer service is — if you have a high retention rate, your customers are more than likely happy.
For retention rate, subtract new customers from the number of total customers you had at the end of the time period, then divide this by the starting number of customers before multiplying by 100. For example, a company with 200 customers at the start and that added 50 during the time period, but lost 10 existing customers in that time, would have a retention rate of 95%.
200 + 50 = 250
250 – 10 = 240
240 – 50 = 190
190 ÷ 200 = 0.95
0.95 x 100 = 95
8. Customer Lifetime Value (CLV)
The value of your acquired customers over time measures how much each individual customer, on average, is worth to your business in terms of revenue. In other words, how much the average customer is spending with you while they remain a customer.
Longer customer retention rates typically equate to higher CLVs because those customers are staying and spending with your business longer. To calculate CLV, you must multiply your average revenue per user by your gross margin, then divide this by your churn rate.
For example, an average revenue per user of $250, a gross margin of $85, and a churn of 7 would result in a CLV of $3,035.71 per customer.
250 x 85 = 21,250
21,250 ÷ 7 = 3,035.71
More on Performance Marketing Metrics
How Do Performance Marketing Metrics Work?
By tracking user actions like clicks and conversions, you can better understand what resonates for your audience and where your campaigns may need improvements. ROI and ROAS are crucial for keeping track of how well your marketing budget is being spent and if those spendings are effective. After all, if you’re not generating sales from your ad spend, you’re losing money on areas that are proving to be unhelpful. This is budget that could be reallocated to different marketing channels.
Why Do We Need to Keep Track of These Metrics?
Not only does keeping track of these metrics matter for optimizing your marketing budget, they also help you become more successful in ways that ultimately impact the bottom line of your business. By understanding how your customers are responding to ads, you can take tangible steps to make their user experience better. This affects the money they spend with you and can also have a substantial impact on how customers view your business in terms of reputation.
Knowing your performance marketing metrics also helps you stay one step ahead of your competition. You can adapt quickly when you have hard data to work from, which can make a big difference in fast-moving and competitive industries.
What is a Good ROAS for Real Estate Marketers?
For real estate-based businesses, the industry-accepted ROAS is a 4:1 ratio. In other words, you should expect to see a $4 return on every $1 you spend in marketing and sales. However, this isn’t a fixed standard and may be higher or lower based on the real estate market you’re working in.
What is a Good ROAS for Financial Marketers?
Much like real estate, a ROAS of around 4:1 is considered a good result, while a 2:1 ratio is generally considered to be the minimum accepted as a positive result for financial marketers.
Key Takeaways
In order to make data-informed decisions as a performance marketer, you must track and understand a range of performance marketing metrics. With this information to hand, you can make more strategic decisions about where to spend your marketing budget and what adjustments need to be made to make your campaigns more effective.
Frequently Asked Questions (FAQs)
What’s the difference between first-click, last-click, and multi-touch attribution?
First-click attribution gives credit for any traffic or conversions to the first interaction a customer had with your brand, while last-click is the opposite — attribution is given to the final stage in the process before they make a conversion. Multi-touch attribution accounts for all touchpoints throughout the customer journey and often gives a more accurate representation of which marketing channels are effective in sales.
How can I track conversions accurately across different devices and platforms?
Using tracking pixels or UTM parameters on your URLs is one of the best ways to track data across different devices and platforms. These tools are designed to help you track data and conversions, even when users switch devices, by following their path through a tagged cookie or URL.
What role does retention play in performance marketing?
Retention plays a vital role in performance marketing, largely because retaining customers is more cost effective than acquiring new ones. Having a strong, retention-focused strategy means you should be tracking metrics such as customer lifetime value (CLV), repeat purchases, and overall ROI for both new and existing customers.
