In my view, this metric represents the overall effectiveness of your PPC campaign. The click-through rate (CTR) measures how relevant your ads are to user search queries. The conversion rate tells you the percentage of visitors who complete your predefined goals once the ads are clicked. These are important metrics, but it may be time to consider conversions per impression (CPI) as well. Let’s take this example:

Of the 500 times my ad is seen (the “impression”), 20 searchers deem it the most relevant and click—a CTR of 4%.  Of these 20 visitors, 2 find my landing page or site meets their expectations and they complete my predefined goals, resulting in a conversion rate of 10%.

Individually, these metrics tell part of the story, but not the whole story. Measuring the success of this ad using the CPI metric, I find that 2 users convert out of the 500 times the ad is seen, thus leaving a CPI percentage of 0.4%.

So how might this metric come in handy?  Let’s use a timely example.  I search for “New Orleans Saints Super Bowl Merchandise” and see these ads:

Ad #1 receives:   2,000 impressions, 150 clicks, 15 conversions

CTR = 7.5%          Conversion Rate = 10%

Ad #2 receives:   2,500 impressions, 100 clicks, 25 conversions

CTR = 4%              Conversion Rate = 25%

Ad #1 gets more visitors to the site, but ad #2 proves to have the better post click experience.  Using our new metric, CPI for each is:

Ad #1:   0.75%
Ad #2:   1.00%

Ad #1 may have the better CTR because the offer of 15% off the purchase is more appealing than having to spend more than $99 to get free shipping. If someone is just looking for a $20 hat, the offer in the first ad is more beneficial.  However, once visitors get to each site, the conversion rate tells us that ad #2 does a better job of turning clicks into customers.  Perhaps the landing page of the second ad showcases more products than the first ad and has an easier user experience.  Ultimately ad #2 does a better job from the start of the search process to the completion of the conversion.  However, CTR and conversion rate are still important metrics as they break down the success of these ads.

I admit that I do not know what an ideal CPI percentage is (or if one is known).  I do know that this metric is gaining traction and needs to be considered by PPC managers.  I encourage your feedback about the importance of this metric and if/how you are working it into your campaign reporting.

Several factors go into creating a good landing page, none of which should be ignored.  These techniques will determine how many of your clicks turn into conversions.  Conversion rate, as I have previously written about, is a tier one success indicator of how well your campaign is doing.  Give your users an effective landing page, and you should see your conversion rates increase.

I am going to discuss the technique that has had the greatest impact on conversion rates in my campaigns.

Clear Messaging

Your landing pages need to clearly state what you want the user to do.  Never assume that the user knows what to do.  Make the conversion process as easy and forthright as possible.

Let’s take an example.  If I do a search for “Rawlings baseball gloves,” I see these ads:

Both ads advertise Rawlings baseball gloves, but which company has the better landing page?  The first ad leads to a page that immediately shows Rawlings baseball gloves:

The second ad leads to the company’s homepage, where customers are forced to search for the product they’re ready to buy.  The second ad will most likely lead to a bounce, because it doesn’t take the user to a relevant page.  By contrast the first ad takes the user right to the product, capturing the user right away and increasing the chance of a purchase.

Another example of a landing page honed for lead generation is one that contains a specific download and a form:

This page combines the registration form and the download function.  Instead of working through two different screens, the user can fill out the form and read the content on the same page.

Here are some other techniques that I have found to improve conversion rates.

Length of Form

If you ask a user to complete a form, be careful not to ask for too much information.  Too often companies ask for everything within this first interaction.  Users see the length of the form and are scared away.  Even if many of the fields are optional, a user’s first instinct is to leave because the form is too long. By asking for less, you improve your chances of converting that user.  Further user information can be gathered by a follow up email or phone call.

Appropriate Tabbing Structure

When filling out the form the user should be able to hit the tab key to go to the next field.  It can be frustrating (and a bit annoying) to use the mouse to get to the next field.

Privacy Policy

Let’s face it, the internet is not the safest place in the world.  Users are weary of giving out their contact information.  For this reason you should include some sort of privacy statement on your landing page.  Whether it be a link to the site privacy policy or a message that assures your users their information will be kept confidential, this item is a must have.

Browser Compatibility and Screen Resolution

Ideally your landing pages should be compatible with all browsers, even the obscure ones.  At a minimum, though, make sure the pages are compatible with Internet Explorer, Firefox, Safari, and Chrome.  These pages should also be compatible with the different versions of these browsers.

Screen resolution is another important factor.  Your key messages and calls to action should appear “above the fold” even in lower resolutions.  Above the fold means the items in your landing page that users do not need to scroll down to see.  Users have several other options and are not going to wait around for you to make your point.

Conclusion

The most important advice is to make sure what you say in an ad is what the user sees on the landing page.  Ultimately you are throwing money away if you are not giving your customers the right user experience.

A three tier structure organizes PPC campaign metrics by level of importance.  Tier One metrics represent the most critical data, while Tier Two and Tier Three metrics do not demand as much attention.  It’s not that certain metrics are irrelevant.  All of these metrics should be analyzed and acted upon in order to improve your PPC campaign success. However, a three tier structure places PPC metrics in order of how well they reflect the success of your PPC campaign.

Here is a look at each tier as a KPI with an example that demonstrates the relevance and importance of the information.

Tier One: Success Indicators

Return on Investment (ROI): The amount of money you are receiving for every dollar that you put into the campaign.  ROI is defined as revenue minus costs divided by costs and can be calculated as a dollar amount, percentage, or ratio.

This metric is extremely important because it shows the value you are getting from your campaign.  In other words, for every dollar you are putting into the campaign how much are you getting back?  It may cost you $20 per conversion, but if your ROI is not reaching your goal then does Cost Per Acquisition (CPA) really matter?  ROI is the ultimate metric to determine how well the campaign is doing.

Conversions: The number of predefined goals that you have setup for the campaign that are completed.  For example, you may consider a conversion to be whenever a user fills out a Contact Us form.  Conversions can also be known as leads.

You run a PPC campaign to qualify visitors as potential opportunities.  So this metric should be with ROI at the top of your concerns.  You can tell your boss that the Click-Through Rate (CTR) of the campaign was 3%, but who cares if clicks do not turn into conversions.  For most businesses, lead generation should be the goal of running a PPC campaign.

Conversion Rate: Conversion rate is defined as the number of conversions divided by the number of clicks and is calculated as a percentage.  In other words, the amount of clicks that turn into conversions.

Conversion rate, more than CPA, determines how well you are generating leads.  Ideally you want every click to turn into a conversion.  Conversion rate specifically tells you the percentage of clicks that turn into leads.  Let’s say your ads are clicked 500 times for a cost of $500.  Two of these clicks turn into conversions for a CPA of $250.  This may or may not be a good CPA to a company, but you do know that the conversion rate is less than stellar at 0.40%. This metric tells you how well you are doing at converting your visitors into leads.

Tier Two: Tactical Measurement

Cost Per Acquisition (CPA): Defined as cost divided by the number of conversions and is calculated in currency.  CPA can also be known as cost-per-lead and is how much the conversion (lead) costs.

CPA is a significant metric, but it can sometimes be misleading.  If your company’s average sale is $10,000 and you spend $5,000 a year on PPC, your ROI is still positive if you make only two sales.  On the other hand, your CPA would seem to be very bad at $2,500 ($5,000/2 conversions).  But CPA is in the eyes of the beholder.  Paying $2,500 per lead might not matter to a company because the revenue received from the sale far outweighs the cost.  Lower CPAs will always look better, but a high CPA is not always bad.

Click-Through Rate (CTR): CTR is defined as the number of times your ads are clicked divided by the number of times your ads are seen (known as impressions) and is calculated as a percentage.

Though CTR can be calculated at the keyword and text ad level, it really is a measure of how well your keywords relate to your text ads.  In other words, does your ad entice a user to click it? If your CTR is 0.01% (clicked once out of every 100 impressions) then you probably need to assess the structure of your campaign.  Are your ad groups segmented enough?  Are your keywords present in your text ads?  Do your text ads have a clear call to action? CTR is a major factor when finding the answers to these questions.

Tier Three: Useful Information

Cost Per Click (CPC): CPC is defined as the cost divided by the number of clicks and is calculated in currency.  This metric tells you how much you are paying each time a user clicks your ad.

Say you spend $100 and your ads are clicked 20 times.  Your CPC is $5 ($100 / 20 clicks).  What does this metric really tell you?  So what if the average cost of one click is $5.  Did you get any leads? CPC does not tell you this metric nor does it tell you how relevant your ads are.  A lower CPC looks better than a higher one, but as long as you get the lead what is the difference?  With more and more businesses creating PPC campaigns every day the competition for page one listings is going to be that much greater, causing your CPC to most likely increase. (It’s worth remembering that your ad ranking is not solely determined by how high you bid.  See an explanation of Quality Score.)

Conclusion

The success of a PPC campaign is determined by its results.  CEOs do not care how much a keyword costs.  They want to know if leads are being generated and if these leads are turning into revenue.  Too often, too much emphasis is placed on the simpler Tier Two and Tier Three KPIs rather than on the more complex Tier One indicators.  This three-tier structure articulates where priorities should lie.