How Well Do You Know Your KPIs?
SteelHouse Performance Analytics Lead Brooke Ellias Explains How to Pick and Optimize Your Goals
Digital marketing is tough — we work in an industry where a fraction of a percentage (hello CTR) is considered a win. So if you can figure out how to optimize and affect that percentage, you’re in the driver’s seat. Taking control over your performance starts with setting the right goals for your campaigns. Whether your focus is on cart-abandoners or loyal customers, optimizing toward the right goal can be the difference between success and staring at a chart with a flat line.
Let’s take a look at some of the more popular KPIs and how they work to help you drive performance.
ROAS (RETURN ON AD SPEND)
ROAS is determined by dividing your revenue by your campaign’s total spend.
Revenue / Spend = ROAS
Generally speaking, this type of goal is great for retailers or anyone else whose main priority is driving revenue. Since they are mainly interested in the dollar amounts attached to each order, pinning their goal on the revenue driven by the campaign just makes sense.
How to optimize it: If you’re optimizing your campaign for ROAS however, optimizing strictly towards conversions is simply not enough. That seems counter-intuitive though — why wouldn’t you want to focus on the thing that would drive hard toward your goal? The answer is that you DO, but conversions are only a part of your optimization strategy.
A single order of $150 is more helpful to ROAS than ten orders that total $50. This is because you’re dividing the revenue derived from your order amount — which means you want higher order values for each user who converts. You can get clever with your targeting to help boost your ROAS by focusing on high-end customers; rather than bidding strongly on any user who put something in their cart, make users who put over $200 worth of inventory in their cart your primary target. This will help get your ads in front of users who are more likely to spend big, and help drive ROAS.
For the uninitiated — to be considered viewable, 50% of a display ad must be on screen for at least one second. Note that this criteria is only for display ads — video and other formats carry their own requirements.
Viewability rate is determined by dividing the number of in-view impressions by the total number of impressions served.
In-view Impressions / Total Impressions = Viewability Rate
How to optimize it: When you’re optimizing for viewability, you’re primarily targeting inventory and location rather than targeting based off of user behavior. Limit your focus to inventory that has traditionally higher in-view rates, and then halo-list those sites. To do this, pull reports for sites you are interested in, and then add the viewability percentage per site. Pick and choose viewability thresholds to bid up on or eliminate from consideration — we like to eliminate the lowest 20%, and bid up on the top 10%.
When you’re working with viewability, you’re focusing on getting your ads seen. Viewability’s primary focus isn’t driving conversions (although it does certainly help), so it’s great to use for prospecting and brand awareness campaigns. For example, ad placements above the fold on a site will generally generate more views, so for your prospecting campaigns, you would want to bid up on above-the-fold inventory and down on placements appearing below the fold. It’s also a good idea to take advantage of tools out there (we use the Quality Alliance Viewability Tool) that allow you to pick a viewability percentage you wish to target, and then only bid on inventory that matches or exceeds your viewability number.
CPA (COST PER ACQUISITION)
CPA is determined by dividing your campaign spend by the number of conversions driven by your campaign.
Spend / Conversions = CPA
This is generally a good goal to work with if your brand deals in high value inventory (like a car dealership), or you’re driving users to a sign-up page (dating sites and gyms). These types of brands aren’t worried about the dollar amount associated with each conversion because their items are either the same price, or they only have a few price options. Therefore, your main aim is to drive the number of purchases since the revenue from each conversion will nearly always be the same.
Generally speaking, the lower the better when it comes to CPA. That said, what can be considered a good CPA varies wildly based on the type of business you are in. For car dealerships, you can end up having a CPA in the low thousands, but that’s actually not bad because you’re selling inventory for $50,000.
How to optimize it: Because CPA is focused on driving your total number of conversions regardless of how much that conversion is worth, you want to optimize towards users who have the highest chance to complete a purchase. This is a bit different than a ROAS-based goal; when optimizing toward CPA, you want those 10 orders over a single one since the order values tend to be consistent, thus making the quantity of orders more important.
To boost the total number of orders, seek out engaged users with high conversion rates. For example, users who have 4+ page views on your site, or have visited the site 5+ times in the past two weeks — aggressively bid on those users. Increasing your CPM to help capture shoppers who you know are likely to make a purchase is a good use of your funds, so don’t be shy about bidding higher to get them.
OPTIMIZE YOUR WAY TO SUCCESS
Success is not only defined by the goals you set, but ultimately the amount of good you do your business. Whether it’s driving awareness, clicks, or revenue, your digital campaigns have a chance to make a big difference. So choose the goal that’s right for your campaign, and optimize by pulling all the levers you have at your disposal — you’ll be setting yourself up for success.
Brooke Ellias is the Performance Analytics Lead at SteelHouse