Track Your Ad Success
After completing this unit, you’ll be able to:
- Explain how ad impressions impact costs.
- Determine how to track customer lifetime value.
- Get a full view of your ad performance with dashboards in Datorama.
Like all digital marketing, it’s important to track the success of your hard work and make improvements where possible. To track your success—specifically, the return on your investment—let’s talk about how you pay for ads. You probably already know that you’re charged for ads based on impressions, but how those impressions are counted and tracked varies by platform. That’s why it’s important to read the fine print and have a good understanding of these ad spend terms.
Opens in an email are counted when a tracking pixel (a tiny, transparent image) is downloaded. Similarly, ad impressions are counted based on whether or not your ad was downloaded on a page (whether or not your ad was seen is another story). If images don’t load properly, ads won’t display to the viewer and the impression is not recorded.
CPM (Cost Per Mille)
Don’t let the name confuse you. Cost per mille means cost per thousand impressions. For example, if you were charged $500 for 1,000 impressions, your CPM is $500. If you were charged $500 for 15,000 impressions, your CPM is $33.33 (500 divided by 15).
CPC (Cost Per Click)
CPC campaigns require a customer to click before you’re charged anything.
CPL (Cost Per Lead)
CPL campaigns are advantageous because you are charged only for qualified leads. This is a great option to make sure you get the most bang for your advertising buck. (A CRM, like Salesforce, helps you connect campaigns with customers who convert to a lead).
CPA (Cost Per Action)
CPA campaigns only charge when a specific action has taken place—like a credit card purchase. This type of campaign gives you flexibility to choose the desired action that achieves your goal.
Customer Lifetime Value
Costs are important to calculate in order to determine your return on ad spend. And a critical piece of that is calculating customer lifetime value. In fact, 27% of advertisers said calculating customer lifetime value is the most important metric to track. Let’s calculate it together.
Start by calculating the average purchase price (or value) of each customer. Then multiply that number by how often they make that purchase in a given year (on average). This is your customer value per year.
NTO Customer Example
Average Purchase Price: $85
Average Purchase Frequency: 2x a year
Customer Value Per Year: $85 x 2 = $170 (per year)
Next, calculate the average customer lifecycle (how long they stay a customer, on average). Take that number and multiply it by the customer value per year. This is your customer lifetime value.
Average Customer Lifecycle: 10 years
Customer Lifetime Value (before business costs): $170 x 10 = $1,700
However, this value does not remove the costs associated with business. To do that, you need to calculate your gross profit margin and multiply that percentage by your customer lifetime value. This determines your business cost per customer. To find a more relevant customer lifetime value, subtract your business costs from the customer lifetime value.
NTO Gross Profit Margin (GPM): 15%
Customer Costs: $1,700 x 15% = $255
Customer Lifetime Value (after business costs): $1,700 − $255 = $1,445 per customer
Not only can you use the customer lifetime value to justify ad spend, it helps tell a story of the importance of customer experience and retention. The longer you keep a customer, the better your profits are going to be. Moral of the story? Hold on to your loyal customers and keep them happy!
Here are some more ways you can measure key performance indicators (KPIs) that highlight the success of your advertising.
||While these metrics measure costs, they also show ad success. The more clicks and views, the better.
||Did your ad increase a customer’s awareness of your brand? This is a bit hard to measure, but it can be extremely helpful to justify certain ads.
|Sales (ecommerce, brick and mortar sales, closed won business)
||Pretty straightforward. The impact your ad had on sales or associated revenue.
||More leads = more sales. Another straightforward metric, the number of new leads gained by your ad.
Advertisers use a wide variety of methods to measure results, from traditional tools such as spreadsheets to website analytics platforms to DMPs. Using a software like Audience Studio allows you to adjust your campaigns, segments, and sites in real time, based on performance. Now that’s smart marketing.
Gain More Insight with Datorama
Want even more ways to analyze your data? Datorama is a Marketing Cloud tool that integrates 100% of marketing data sources, giving you a single place to evaluate marketing performance and drive growth. Within Datorama, you can create custom dashboards and filter data by metric, platform, creative, and more.
Because Datorama pulls data from a variety of sources, including Audience Studio and Advertising Studio, you can have a holistic view of your advertising campaign performance.
In addition to dashboards, Datorama’s Einstein Marketing Insights uses AI to review cross-channel performance for your most important KPIs. The tool shows what’s working and also suggests tweaks to improve performance. Check out the module, Datorama for Marketing to learn more about this AI-driven tool for marketers.
Regardless of how you track, it’s important to monitor your progress and then iterate for constant evolution. And you’re well on your way! Congrats advertiser, you have reviewed your content, created new audiences, and used smart data to enhance your advertising strategy. We hope you’re excited about the future of advertising—and your brand new AI badge.
Rights of ALBERT EINSTEIN are used with permission of The Hebrew University of Jerusalem. Represented exclusively by Greenlight.
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