Three Important “C-Rate” Metrics
August 14, 2014
One of my favorite things about working in pay-per-click advertising is the metrics.
No, seriously! As nerdy as that sounds, I love being able to look at the hard numbers to see how we’re doing and where we can improve. By analyzing various rate metrics, we can evaluate how we’re doing over time, across campaigns, between ad variants—the possibilities are endless!
With so many different rate metrics, it can be tough to decide which ones to look at. I’ve picked three that are useful when viewing the conversion funnel of how visitors come through our pay-per-click ads, interact with our landing pages, and ultimately convert into business: click-through rate, conversion rate, and close rate.
Take the most basic metrics of PPC: impressions and clicks.
Simply put, impressions tell us how many times our ads have shown up in front of a searcher, and clicks are how many times someone actually clicked on one of our ads. These are nice, but understanding how these numbers relate to each other will give us a more interesting metric: divide clicks by impressions, and Voila! Click-through-rate.
In it’s simplest use, click-through-rate (or “CTR”, as it is known in the PPC world) gives us an overall idea of how good we are at getting someone to click on our ad, or how relevant the ad is to a user’s search query.
In other words, CTR tells us how well our ad answers the searcher’s question.
“Good” CTRs vary by industry, geographic area, seasonality, and other factors. These are hard to nail down perfectly, but here are some averages by industry for 2012.
So let’s say we’re happy with the CTRs we’re seeing in our campaign. We are feeling super awesome at our ability to get people to click on our ads! High-five!
But what we don’t know yet is how good we are at getting visitors to take action once they land on our website. In other words, after they click through to our site, are they converting?
What Counts as a Conversion?
Every website has an end goal, or some specific action it wants visitors to do. When these actions occur, it’s called a conversion.
For e-commerce sites, the end goal is usually to have the visitor make a purchase or place an order. Examples of these are online retailers like Zappos.com and Amazon.com. For these websites, each purchase counts as a conversion.
On the other hand, lead-generating websites are used by businesses that typically require a little more work to ‘sell’ the visitor on making a purchase.
Some examples are service based businesses like plumbers and home security, and businesses that sell higher-ticket purchases like cars. The goal of such lead-generating websites is to collect the visitor’s contact information so sales people can reach out and close the sale.
With the lead-generating model, some common ways a visitor can convert are: calling the phone number on the site, filling our a request for an estimate/quote, or asking a question via a live chat on the site. (For adding chat capabilities to your website, we like Olark!)
The second two examples usually ask the visitor to submit their contact info, and other information that will be used by sales people to help answer their questions, and ultimately get the sale. Interactions such as these all count as conversions.
Note: In the case of lead-generating sites, when used in the context of PPC, we refer to leads as conversions, even though it may not have ‘closed’ yet.
With an understanding of what counts as a conversion, it’s pretty easy to see why we’d want to know our conversion rate. To calculate conversion rate, simply take the total conversions divided by the number of visitors.
If you are driving traffic to your website from multiple channels (i.e., PPC, social media, and email marketing), you can calculate conversion rates for each one to see which marketing channel is converting best.
As with CTR, conversion rates very by industry, and are greatly affected by how conversion-friendly your landing page is. (For help improving your landing page, check out a few of our past blog posts: Real Estate and Conversion Rate Optimization and A 7 Step Guide to Creating an Awesome Landing Page.)
Conversion rates are also different for e-commerce vs. lead-gen sites. Overall, it’s a good idea to research your industry to determine what typical conversion rates are, in order to see how you stack up.
For businesses that are focused on generating leads, there’s one more rate we want to track: close rate, or the rate at which we turn our leads into sales. Because closing the sale happens offline, with human interaction, it won’t be included in your pay-per-click dashboard (i.e. AdWords or bing ads).
But it’s pretty easy to calculate: divide your total sales by your total leads, and you have a metric you can use to gauge how effective your sales people are at closing leads. For more info on improving close rate, check out this post from Profitworks.
Well there you have it: three ‘C-rate’ metrics that can help you better understand how effective your PPC campaign is, from the first click on your ad to closing the lead. Go ahead – calculate your CTR, conversion, and close rates! Or let Disruptive help you nail down your baselines, and boost them even higher!