5 KPIs to measure paid media success and 5 to measure business success

October 15, 2024 keywordana

Boost clarity in your digital marketing strategy by tracking paid media and business KPIs that align marketing success with long-term growth.

Measuring PPC success can be challenging when teams lack clear, actionable metrics.

Without the right KPIs, it’s challenging to know whether your paid media campaigns or business initiatives are truly performing.

This lack of clarity can lead to misaligned goals, wasted efforts and missed opportunities, leaving teams confused about what is and isn’t working.

By focusing on the right KPIs for both paid media and overall business success, you can create alignment, drive performance and achieve measurable growth.

Here are five KPIs for each area that will help you stay on track.

5 KPIs to track for paid media success

1. Cost per click (CPC)

Formula:

CPC = Total cost / Total clicks

CPC doesn’t directly show bottom-line performance but can be a useful early indicator of factors affecting your paid media campaign.

A rising CPC may suggest increased competition and more bids on your target keywords.

This helps you assess how well you’re maintaining your position in the market and holding up against competitors.

While not a main KPI, CPC is helpful for gauging keyword competition and adjusting your targeting strategy as needed.

Track CPCs over various periods of time (e.g., week over week, month over month, quarter over quarter, etc.).

This lets you:

Understand changes in competition and general search engine results page (SERP) fluctuations over time.
Provide a window into seasonality, improved interest or increased competition to become proactive in maintaining presence rather than reactive to competitive fluctuations.

Formula:

IS = Total impressions / Total available impressions

Impression share is not always a top KPI, but it offers useful insights into ad performance. It shows how well your ads compete in the marketplace, especially when combined with other data.

A low impression share could mean your ads are limited by budget (check auction insights) or low quality (check CTR and quality scores). While not enough on its own, it’s a helpful metric to guide optimizations.

Impression share “lost to rank” could suggest a need for improved ad quality or higher bids.

Impression share “lost to budget” could highlight the need to assess budget allocation and make sure you are cutting irrelevant spend.

Dig deeper: Setting PPC goals: How to tailor KPIs and metrics for each funnel stage

3. Click-through rate (CTR)

Formula:

CTR = Clicks / Impressions

CTR is a simple metric, but it reveals a lot about the performance of your paid media campaigns.

At a high level, it measures engagement and shows if your targeting, messaging, landing pages and offerings meet audience needs.

A high CTR means your messaging is resonating, while a low one suggests adjustments are needed.

By analyzing CTR at the keyword or audience level, you can identify top-performing segments and eliminate weaker ones to optimize ad spend and scale performance.

Set your CTR-based KPIs by examining your historical averages to understand what has worked/has not worked in the past and combining them with current research. Using context from both past and present will allow for more realistic future goal setting.

Dig deeper: The fallacy of CTR as a KPI: Redefining PPC ad success

4. Cost per acquisition (CPA)

Formula:

CPA = Total cost / Acquisitions

Setting KPIs for CPA depends on how you define an “acquisition.”

It’s helpful to have multiple acquisition stages to track performance across the entire user journey.

Measuring CPA at each step gives a clearer picture of efficiency. If you only measure the top-level conversion (like a form submission), you miss insights from later stages.

For example, a high cost at the top of the funnel with a lower cost at the bottom can still mean success, as it reflects higher-quality conversions.

Ultimately, CPA helps you understand how effectively we’re using ad spend and where you can scale our efforts.

Set CPA targets using both historical data and product details.

Historical performance shows what’s realistic based on past success.
Product info – such as price and sales costs – helps determine what you can afford to pay for an acquisition while staying profitable.

5. Conversion rate (CVR)

Formula:

CVR = Conversions / Clicks

Conversion rate tracks how many users take the desired action at different stages of the funnel, from clicking an ad to making a purchase.

Measuring CVR at each stage helps identify where prospects drop off, which could point to issues like misaligned messaging or friction in the user experience.

For example, low early-stage conversion rates may indicate a need for nurturing prospects before pushing for a conversion.

Use historical data to set realistic CVR targets and understand the user journey to set meaningful KPIs.

Bonus: Return on ad spend (ROAS)

Formula:

ROAS = Return / Ad spend

ROAS is one of the most important KPIs for evaluating paid media success. It shows exactly how much revenue the business earns for every dollar spent on advertising.

While it may seem straightforward, ROAS is the most accurate way to answer the question, “Is this working?”

For ecommerce, tracking ROAS is simple – just use revenue and ad spend data from your advertising platforms. Set up a custom ROAS metric in Google Ads to monitor performance at every level.

For lead gen businesses, measuring ROAS is more complex, as you need to link offline conversion data, including revenue, back to your CRM. Once set up, ROAS can be tracked just like in ecommerce.

5 KPIs to track for business success

Measuring marketing performance is important, but it’s just as crucial to set KPIs at the business level.

Ideally, your marketing KPIs should align with your business KPIs to ensure all efforts are working toward the same goals.

Some metrics may overlap, but they differ in how they’re calculated and used.

1. Conversion rate

At the business level, conversion rates go beyond just measuring paid media campaigns. They reflect the effectiveness of the overall sales process and how well your offerings meet customer needs.

By comparing conversion rates across different channels (e.g., paid media, outbound marketing, direct outreach) and at various stages of the user journey (e.g., first touch, first meeting, pricing conversations), you can identify opportunities for improvement.

For instance, if your paid media conversion rate is significantly higher than that of other channels, it may indicate inefficiencies or misalignments in your other customer generation efforts.

Understanding aggregate conversion rates and channel-specific rates is essential. To gain the clearest insights, set KPIs for both based on historical performance.

2. Customer acquisition cost (CAC)

Customer acquisition cost measures the total expenses of acquiring a customer, including ad spend, sales team costs and vendor expenses.

This KPI is crucial for setting budgets, forecasting revenue and assessing the long-term sustainability of your business model.

By monitoring CAC across all channels and initiatives, you can proactively adjust your marketing spend and optimize for the most cost-effective customer acquisition methods.

3. Return on investment (ROI)

While ROAS measures the revenue generated for every dollar spent on advertising, ROI offers a broader perspective on profitability across all business activities.

By using ROI as a top-level KPI, you can quantify the profitability of investments across various business lines and gain a comprehensive understanding of your initiatives’ financial impact.

When developing your ROI calculations and setting KPIs, ensure you account for all financial elements, including tool costs, staffing expenses and overhead. This approach will help you create a complete and accurate financial picture.

Dig deeper: 3 PPC KPIs to track and measure success

4. Customer lifetime value (LTV)

LTV represents the total revenue generated from a customer throughout their relationship with your business.

Establishing a KPI based on LTV enables accurate revenue projections and long-term profitability modeling. It provides justification for flexibility in your CAC KPIs when needed.

Track LTV both in aggregate and by individual channels to identify the best customer acquisition strategies. This will help you prioritize targeting your highest-value customers.

5. Payback period

The payback period measures the time required to recoup the investment costs associated with acquiring a customer.

Evaluating the payback period as a business-level KPI provides valuable insights that inform decisions about scaling efforts, optimizing efficiency and assessing potential profitability.

A shorter payback period supports more aggressive scaling, while a longer payback period indicates a need to optimize acquisition strategies or reduce costs.

To calculate your payback period KPI, align your CAC and LTV KPIs. If your LTV exceeds your CAC, your acquisition costs will be recouped over time.

Understanding this relationship – both holistically and at the channel level – will help you structure your efforts effectively and ensure long-term profitability.

Setting meaningful KPIs – and why you should stick to them

When setting KPIs, it’s crucial to base them on accurate historical data. Poor or misleading information can skew targets, leading to unattainable goals. Focus on KPIs that significantly impact profitability and long-term business success.

It’s also essential that everyone involved understands their role in achieving these KPIs. Each team member should know they are accountable for their contributions and how their performance will be assessed.

Consistency in KPIs fosters accountability and drives continuous improvement, ensuring that marketing and business objectives align.

Frequently changing KPIs can create confusion and lack of direction, leading to lower performance and reduced cohesion.

By strategically selecting KPIs at both the paid media and business levels, you can align marketing campaign performance with broader business objectives, promoting clarity, cohesion and measurable success.