For doing and getting an expert in digital marketing you need to know some important formulas in online advertising or online marketing. But let’s assume that you are not aiming to be an internet marketing specialist. For ongoing business purposes, you need to know some important online advertising formulas as long as you are directly involved with digital media. No matter who you are – an entrepreneur, an aspiring digital marketing learner, an in-house social media manager, or maybe a newbie online advertiser, anyone who is involved with this marketing matter needs to know at least the basic online advertising formulas in order to be successful in this field. To better manage your online marketing campaigns and measure their success, keep these formulas handy.
CTR – Click through Rate
CTR is Click through Rate. This is the percentage rate at which people click on your ad banner. If your banner ad is seen by 100 people but clicked by one person – then its CTR is 1% or .01
Similarly, if your ad banner is seen 100,000 times and in the same time period it is clicked 2000 times – then your banner CTR is 2% or .02.
This is how we calculate CTR …
(Number of Clicks / Number of impressions) x 100
For example, for the above case, it would be –
(2000 / 100,000) x 100 = .02
CPC – Cost per Click
CPC means Cost per Click. This is how much you would pay the ad network or website every time a visitor clicks on your banner. This type of CPC rate can be as high as $3 per click or as little as 5 cents per click. It depends on your product and your market – amongst other factors, the more competition there is – the higher you will probably end up paying as you compete with competitors.
CPA – Cost Per Action/Acquisition
CPA means Cost per Action. It could be any type of related action – A visitor clicking on your banner coming to your site and filling up a simple inquiry form (CPR – Cost Per Registration), or if the visitor makes a purchase (CPS – Cost Per Sale). It could be a flat fee or a percentage commission of the sale made.
ROI – Return on Investment
ROI stands for Return on Investment and is a very common term used by marketers around the world. To understand the success of a campaign or a business as a whole, it is very important to know the monetary benefit (in our case, the revenue) earned against the money invested to acquire it. ROI is calculated by subtracting the total cost from the total revenue generated and dividing the result by the total cost.
ROI = (Total Revenue – Total Cost) / Total Cost
Example: Here is an example of ROI. Suppose an e-commerce store has generated US$ 2000 from an online advertising campaign and disbursed US$ 500 on the campaign. The return on investment is (2000-500)/500 = US$ 3 which is 300% of the cost when converted into the percentage. 300% return on investment is pretty high but it is also true that achieving a high ROI is not easy. We can state that for every dollar spent on the campaign, the business generated US$ 3.
CR – Conversion Rate
If your online marketing campaign’s goal is only to generate revenue, conversion is the most important metric that you need to consider. Conversion may have many different meanings. But in terms of marketing, it is a phrase used to describe a situation where a customer takes a specific action that had a positive and profitable impact on your business. In online advertising, a conversion rate is the ratio of conversion created by an ad on a website to the number of clicks the ad generated.
CR = (Number of Conversion / Number of Clicks) X 100
Why do you need to know about these before starting your online marketing?
There are a lot of different KPIs (key performance indicators) that you could choose from to measure how your PPC campaign is doing.
Nowadays one of the most popular ways to increase sales is digital marketing. In fact, spending on digital marketing is projected to increase by anywhere from 12-15 percent.
Although it’s actually surprising about the number, recent research says that many businesses have a hard time measuring the results of their digital marketing campaigns. In general, most marketers don’t know which digital marketing efforts have the best revenue impact, and some businesses don’t even track metrics that give this information.
To make sure you are spending your digital marketing budget in a way that will help you increase sales, here are the top digital marketing KPIs you should be tracking, and information on how they help inform your strategy.
Email marketing KPIs
It probably won’t surprise you that email marketing is among the best marketing techniques to increase sales. In fact, 60% of marketers say that email marketing is producing an ROI for their organization, and 32% of marketers say that email marketing will produce an ROI for their organization. Other reports even indicate that email marketing can yield $44 for every $1 spent. Nowadays most marketers believe that email marketing is the best e-commerce tool, it’s important to remember that not every email will be as equally as effective in generating sales. The whole system of getting emails to convert includes a mix of creativity, strategy, and, of course, data analytics.
Social media marketing KPIs
Another vital part of your digital marketing strategy to increase sales should be social media marketing.
If it’s not, it should be. After all, 90% of young adults (ages 18-29) use social media. Something that is particularly interesting, especially for B2B companies out there, is 84% of VPs and CEOs report that social media influences purchasing decisions.
However, making sure your social media marketing strategy is converting to sales for your audience isn’t as simple as just posting content on your profiles.
Digital ad KPIs
Do you want to grow your sales on an e-commerce platform? Then it’s important not to leave digital advertising out of the equation.
Online advertising is one of the most profitable ways to increase sales. In fact, according to recent studies, when non-viewed ads are filtered out, brand lift improves by 31%.
Nowadays to boost sales and create brand awareness among the focus group digital advertisement is a great way, just like email marketing and social media marketing, there is a science to it. The best way to make sure your ads are resonating with your target audience and really hitting the mark is to keep your eye on e-commerce related digital advertising you can easily adjust your strategy based on what the numbers are telling you.
Digital marketing can work for any business in any industry. Regardless of what your company sells, digital marketing still involves building out buyer personas to identify your audience’s needs and creating valuable online content. However, that’s not to say that all businesses should implement a digital marketing strategy in the same way.
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