The 8 PPC metrics you should be tracking
Article topics
- Profit margin
- Average order value (AOV)
- Marketing efficiency ratio (MER)
- Customer lifetime value (CLV)
- Cost per acquisition (CPA)
- Budget utilisation rate (BUR)
- Time to conversion
- Quality score
- PPC metrics: Frequently asked questions
Pay-per-click (PPC) advertising can seem a little daunting if you’re new to it. The good news is that there are lots of different metrics you can use to see if your ad campaigns are on the right track.
Whether you use Google Ads, Microsoft Advertising, or Meta Ads to promote your business, here are eight metrics that will tell you everything you need to know about your ad campaigns.
Not sure what PPC is? Check out the ultimate guide to PPC advertising!
1. Profit margin
Profit margin identifies how much profit your ads are bringing in. As this metric takes all your overheads into consideration, it shows you how much money your PPC campaigns are making for your company.
To calculate profit margin, subtract your ad spend from your gross profit and divide by your revenue, then multiply by 100 to get a percentage.
A good profit margin typically falls between 5 and 10%, but the number that’s right for your business will depend on the industry you’re in and what you sell.
Top tip: Segment your ad campaigns and identify the specific profit margins for each for improved accuracy. For example, you may find your retargeting campaigns have a significantly higher profit margin than your search ad campaigns.
2. Average order value (AOV)
Average order value measures the average total spent when a customer places an order on your website.
It is calculated by taking the total revenue earned by PPC and dividing it by the total number of orders made. So if you earn £10,000 in a PPC ad campaign and 1,000 orders are placed, your AOV is £10.
A high AOV means you can bid more aggressively for keywords. It also helps you identify high-value keywords, ads, and assets that appeal to people who want to spend money in your store.
Top tip: If your conversion rate drops, take a look at your AOV. A lower conversion rate but a stable or increased AOV means you’re getting fewer sales, but the sales you’re getting are larger.
3. Marketing efficiency ratio (MER)
Marketing efficiency ratio (MER) is a powerful top-level metric you can use to determine the efficiency of your overall marketing. You calculate it by dividing your total revenue by your total marketing spend.
MER is useful as it provides a baseline you can use to identify the success of your PPC. If you increase your PPC spend and your MER stays the same or increases, it’s a sign that your PPC ad campaigns are working.
If your MER drops, it could mean that you’re targeting customers who would have converted through other means, like social media or organic search engine traffic.
Top tip: While MER is a valuable metric, it’s best when combined with other metrics which specifically determine how your PPC campaigns are doing.
4. Customer lifetime value (CLV)
Customer lifetime value (CLV or CLTV) measures how much money a customer spends with you over the course of your business relationship.
This metric is tricky to measure, but it’s definitely worth spending time on! To measure it, multiply your average order value by your purchase frequency rate and average customer lifetime.
You can use CLV to identify high-value audiences and keywords that are worth investing in. If your CLV starts to drop, it may be a sign that you’re not appealing to existing customers.
8 ways to increase your customer lifetime value
Top tip: You can increase CLV through your PPC channels by focusing on the customers who have already bought from your business.
Use retargeting ads to show them related products they may be interested in, and remarketing lists to tempt them back to your store with special offers.
5. Cost per acquisition (CPA)
Cost per acquisition (CPA) measures how much money you spend on getting a customer to convert on your website. By ‘conversion’ we mean taking a specific action, like buying a product, asking for a quote, or signing up for your newsletter.
You calculate it by taking the total amount spent and dividing by the number of conversions. So if you spend £500 and get 100 conversions, your CPA would be £5.
This metric shows you which campaigns are most efficient, as well as which ones need to be improved.
Top tip: If cost per acquisition is too generic for your needs, consider cost per incremental acquisition (CPIA) instead.
This is when you measure the cost of acquiring a new customer who only converted because of a specific PPC campaign.
CPIA factors out organic conversions that would have happened regardless of your PPC campaign, letting you see how efficient your PPC is.
6. Budget utilisation rate (BUR)
Budget utilisation rate (BUR) shows you how much of your PPC budget you spend in a given period, and what you have left. It’s useful for determining if you’re likely to run out of money earlier than expected.
You calculate it by dividing the total amount spent by the amount you’ve budgeted, dividing by 100 to get a percentage. So if you’ve spent £800 and have budgeted £1000, your BUR would be 80%.
BUR is also useful for seeing if you’re spending less money than you have. If your BUR is low, it’s a sign that you can increase what you’re bidding or move your leftover budget to other high-performing campaigns.
Top tip: If your BUR keeps hitting 100%, there are things you can do to lower your budget and increase the chance of the right people seeing your ads.
A good strategy is dayparting – this is when you identify your peak hours for engagement and conversions and set your ads to only run during these times.
7. Time to conversion
Time to conversion measures the duration between when someone first views or clicks on an ad and when they convert.
The optimal time to conversion will depend on what you sell. For example, if you sell low-value items, your time to conversion could be immediate. If you sell SaaS tools to businesses, your time to conversion could be months, even years.
If your time to conversion increases, it could be a sign that customers are getting stuck in your sales funnel and you need to provide them with more content that encourages them to convert.
Top tip: If you use Google Ads, there’s a days to conversion report which makes it easy to monitor time to conversion.
Choose campaigns, ad groups, or keywords from the menu, click segment, and choose conversions > days to conversion.
8. Quality score
Quality score isn’t like all the other metrics we’ve discussed – Google Ads recommends that businesses not use it as a key performance indicator, as a high score doesn’t always guarantee high performance.
However, it can be a great way to see if your ads are on the right track.
A quality score is a score between one and ten that Google Ads assigns to each keyword you use in your campaigns.
Google Ads uses three criteria to determine this score:
- Expected click-through rate
- Ad relevance – how likely your keywords and copy are to match a user’s search intent
- Landing page experience – how helpful the page your ad takes a user to is
A high score shows your ad and keywords are highly useful and relevant, while a low score shows you need to refine your ad campaign.
A good score can also lower your CPC – if you get a ten, you pay 50% less than if your ad scores a five, which is the Google Ads benchmark.
Top tip: Quality score is most associated with Google Ads, but Microsoft Advertising uses it as well.
While other platforms don’t use quality score as such, they use similar ranking systems. For example, Meta offers an ad relevance score to show how your ads are performing.
PPC metrics: Frequently asked questions
Can I use return on ad spend (ROAS) as a metric?
The thing with ROAS is that it doesn’t tell you the whole story about your PPC campaign, as revenue doesn’t equal profit. Your ad campaign may have a high ROAS, but if you have a lot of overheads, you could be running at a loss.
The metrics in this article will provide a much clearer insight into how your campaign is doing, particularly profit margin, which uses profit rather than revenue and takes overheads, product costs, and other outgoings into consideration.
What is a vanity metric?
A vanity metric is one that looks impressive on paper but doesn’t help you grow as a business.
As a rule of thumb, if a metric increases or decreases, and you’re not sure what action to take, it’s a vanity metric.
Some examples of PPC vanity metrics include impressions, clicks, and click-through rate.
How many metrics should I measure?
While you may be tempted to monitor several metrics to determine the success of your PPC campaign, we recommend keeping an eye on about 5 or 6.
Monitoring lots of metrics can be overwhelming and could mean you’re unable to action any issues you uncover. It’s far better to measure a handful of metrics that you can easily monitor, review, and act on.
What is the ideal benchmark for my PPC campaigns?
It’s tricky to say as it depends on what you’re measuring, what industry you’re in, and what you’re selling. For example, you may be more willing to tolerate a higher CPA if you’re selling something high value like a holiday or car.
The best organisation to benchmark against is yourself. Regularly monitor your chosen metrics and you can take decisive action as soon as you uncover any issues.
Need a skilled eCommerce agency to crunch the numbers?
PPC advertising is a brilliant way to find new customers and encourage existing customers to buy from you again.
Keeping tabs on your metrics means you can quickly check how your campaigns are doing and make small, frequent changes that drive sales.
If you need a little extra help getting started with PPC, we’re your one-stop service provider. We’ll help you choose the right ad package for your needs, identify the right keywords, and create killer ad copy.
And of course, we’ll monitor your metrics so you can focus on what you do best – running your business.
Get in touch today, and let’s get your PPC campaigns up and running!
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