Click-through rate is a useful measure, but many marketers over-rely on it to judge the success of their campaigns. Taboola's Stacey Delaney shares four alternative measures to consider
How do you calculate the return on investment (ROI) on your digital ad spend?
If your brand has only focused on click-through rate (CTR), you could be missing valuable opportunities to reach your ideal audience.
While CTR is important, its importance is only within the context of other business metrics. If potential customers regularly walked into your bricks-and-mortar store, browsed your products, but no one ever made a purchase, your business wouldn’t be considered very successful, would it? Users may click on your ads (or walk into your store) as a first step. However, what happens after the click, such as purchases or sign-ups, is where businesses sink or swim.
In fact, since ‘metrics beyond CTR’ is such an important topic in digital advertising, IAB UK devotes an entire day to it annually. This year, National Anti-Click-Through Rate Day falls on February 14, 2022.
The simple truth is that, when it comes to digital advertising effectiveness, CTR does not tell the whole story. And that means digital marketers are missing valuable opportunities to reach new markets, make more money, and save extra cash.
Today, savvy business owners and marketing pros are getting ahead of their competitors by turning their attention towards other metrics that are equally, if not more valuable than CTR. Why? Because these metrics more accurately represent behaviours indicating targeted sales opportunities. And they point the way to more efficient marketing paths that save time and money while directly boosting measurable sales.
CTR tunnel vision means missing data
The problem with relying solely on CTRs as an indicator of effective marketing spending is transparency. When you depend solely on CTR to evaluate the success of a digital marketing campaign, all you measure is the rate at which people click on your ad.
This can be a good measure of how attractive your ad creatives are; however, it doesn't tell the full story.
A higher CTR doesn't tell you whether the reader that clicked through actually bought, so you can't directly correlate CTR with sales. Because CTR doesn't tell you why the viewer clicked on your ad, you have no way of knowing whether your creatives are actually attracting qualified buyers. Maybe a user just wants to see a picture more closely, and clicks through but doesn’t buy. Or maybe your ad creative doesn't make it clear that there is something to buy behind the link in the first place. In that case, you pay for clicks that don't convert to sales.
Even in the case of brand awareness campaigns, CTR only tells part of the story. How many people saw your ad but didn't click? Were those who did click relevant to your brand?
Instead of exclusively tracking CTRs, smart marketers have turned their focus to less popular digital marketing stats. They're using them to help streamline and accelerate marketing activities and increase the value of digital marketing efforts.
CTR alternative metrics to prioritise
Forward-looking brands are making marketing decisions in tune with metrics other than CTR, and also experimenting with new technologies to lower cost and boost sales.
For example, some brands focus on reducing cost per acquisition (CPA) and are embracing cutting-edge AI analytics to acquire attentive audiences, rather than simply accepting high CTRs as “proof" of marketing success.
The results of this move away from CTR-dependent marketing evaluations are impressive. These brands concentrate on getting their brands on premium publishers with quality, relevant audiences, and then using retargeting to reinforce their messages to audiences most closely aligned with their ideal customer.
Here are four examples of alternative metrics to consider.
1. Cost per acquisition (CPA)
Rather than measuring clicks, cost per acquisition is a measure of the cost incurred to get a single customer to complete an intended action. What that action is depends on your goals: often, this is purchase, but it could also be a form submission, sign-up, resource download, or something else entirely. CPA is measured by dividing advertising spend by number of acquisitions.
Cost per acquisition can be lowered by optimising your ad creatives to be more appealing to your target audience – and less so to people who are unlikely to convert. This might decrease your CTR, but those who do click on your ad will be more likely to take your desired action.
One way to do this is to increase the clarity of your ad creatives: make it clear what you are offering and what users need to do to take advantage of the offer. For example, Look After My Bills, an auto-switching service dedicated to making energy bills work better for customers, was able to lower CPA by 22% simply by adding call to action buttons to their creatives. This helped set users’ expectations before they clicked into the ad, essentially pre-qualifying them, and saving Look After My Bills money.
Another way to reduce CPA is by targeting users who have previously expressed interest in your offering, and showing them advertorial content designed to lead them to the next stage of the funnel. A special welcome offer might work well here; for example, Look After My Bills was able to reduce their CPA by 60% and gain 10,000 new members through advertorial content targeted at users who had previously spent a significant amount of time on their website, but not converted.
2. Average order value (AOV)
Another useful measure for retailers looking to drive immediate purchase behaviour is average order value (AOV). This is calculated by dividing your overall revenue by the number of orders placed. Tracking AOV is important to make sure that you are maximising the potential revenue from each customer that comes through your sales funnel. Unlike CTR, AOV is a clear measure of how valuable the customers clicking on your ads are.
Comparing AOV across your different marketing channels can also help you assess audience quality across those channels, and make decisions about how to allocate your resources, and how to optimise use of each.
A retailer who finds that customers acquired through Taboola are, on average, spending more than those acquired through Facebook might want to create separate campaigns for the two audiences. For example, they could advertise their loyalty programme to high spenders on Taboola, while promoting a volume discount offer to lower spenders on Facebook (“Buy two, get one free”).
Offers and incentives are a great way to increase AOV: for example, you could offer free shipping for purchases over a certain value, or suggest other merchandise customers might like to pair with the items already in their cart.
You can also optimise your ad creatives to increase AOV. For example, a retailer might target customers with an ad that emphasises their free shipping offer and flexible returns policy, thereby removing risk to the customer, and encouraging them to buy more.
3. Lifetime value (LTV) & retention rate
For advertisers with a subscription model, retention rate and lifetime value (LTV) are crucial measures to keep track of. These measures give an indication of whether consumers are just making a one-time purchase, or are going on to become loyal customers. Retention rate measures the percentage of customers still purchasing from you after a given period of time. Lifetime value, on the other hand, measures the total revenue a customer generates for your business over their lifetime.
Tracking retention rate and LTV is especially important for subscription businesses. A wine subscription company may find that their ads, which promote an attractive welcome offer, achieve very high CTR and CPC, but that a large proportion of those customers churn after taking advantage of the offer. If the company were only tracking CTR, they might not realise that they’re actually making a loss despite the apparent success of their campaign.
By tracking LTV across different marketing channels, marketers can hone in on which channels bring in users that not only convert, but continue to buy from your brand moving forward.
Lifetime value and retention rate can be improved by taking a proactive approach to converting new users into loyal customers. For instance, encouraging those who make a purchase to sign up to receive email communications can allow you to keep them informed of offers and encourage future purchases. Loyalty programmes that give users credit for making regular purchases are also effective at improving retention rates.
4. App downloads (S2S tracking)
In the case of advertisers looking to drive app downloads, server to server (S2S) tracking makes this simple to do. S2S is a secure way of tracking conversions that doesn’t rely on cookies. Rather, when a user clicks on an ad or tracking link, a unique identifier is generated which can be matched to determine whether or not that user converted. This is preferable to just looking at CTR because it allows you to track whether the user actually took the desired action - in this case, downloading your app. You can also use S2S to track in-app events such as post-install purchases.
Most digital advertising platforms have an API available to make S2S tracking simple to set up and use. For example, the Blinkist app (which helps readers quickly grasp the main ideas of popular non-fiction books) used S2S tracking through Taboola to track app downloads, allowing them to better qualify their audience and optimise their creatives, leading to 60,000 new subscribers.
By fixating on CTRs, brands miss important clues and opportunities to locate and connect with the right audiences. Instead, consider the other metrics that could point to a more efficient path and higher quality audiences, thereby reducing your CPA and increasing your current and future sales.
Posted on: Tuesday 8 February 2022