Is my PPC agency showing me the right metrics?
Agencies that manage pay-per-click advertising campaigns for their clients want the client to continue paying them, so they may show them metrics that highlight what a good job they are doing, rather than metrics that help them properly evaluate the benefits of continuing the service.
An agency typically might give you regular updates focused on your Return on Ad Spend (ROAS). This metric is great for seeing how efficient an ad campaign is, and it is what the agency has most control over. They usually calculate a figure for you using (Revenue generated by Ads / Cost of Ads) x 100.
That’s helpful right? Well yes it has its uses, you can use it to demonstrate the effectiveness of ads at generating clicks, impressions and even revenue. But (and there is a but) ROAS is focused on revenue against direct spend rather than profit against overall spend.
That means there is a different metric you need to really understand the value of your marketing campaign. Yes, it's the good old Return on Investment (ROI) metric. ROI will show you the profit against your overall cost. This is simply calculated with (Net Profit / Net Cost) x 100. This is the metric you need in order to know whether your paid advertising is actually profitable for your company.
Should I ask my PPC agency for my ROI?
Most definitely. Most decent agencies will tailor their reports for you to highlight the data you want most. That doesn’t mean you shouldn't look at the ROAS data too, but the ROI will give you the bigger picture.
What other metrics should I be looking at?
The metrics you need are the ones that indicate how well they are helping you to achieve your business goals. At the start of any campaign your agency should discuss appropriate Key Performance Indicators (KPIs) with you. The metrics they provide should allow you to compare campaign results to your KPIs. Some of the most popular metrics include increase in sales / leads, revenue, ROI, ROAS and engagement.
How will the metrics show me the increase in sales or lead generation?
Your marketing agency will look at your baseline performance and then compare the change after the PPC campaign has begun. This is referred to as Marketing Mix Modelling (MMM), a method that can provide a good overview of your marketing across all channels. However, because many customers will not buy / enquire on their first visit to your website, MMM may not include all the sales your PPC should be credited for. There is another technique known as Multi-Touch Attribution (MTA) that can be used to figure out which campaigns should be credited with the conversion. Many platforms only provide ‘last-touch attribution’ as it is easier to track the last action before the conversion, but this doesn’t let you properly understand the performance of your campaigns.
I don’t understand the metrics.
If your agency won’t or can’t explain the metrics in a way that is understandable to you or you have concerns about the data presented, a digital marketing consultant can help. They can interpret technical metrics into useful information that can help you make practical business decisions.
Definitions in this article:
PPC: Pay per click
ROI: Return on Investment
ROAS: Return on Ad Spend
PPC: Pay per click
MMM: Marketing Mix Modelling
MTA: Multi-Touch Attribution