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Key metrics in online advertising for every eCommerce business owner

by / Monday, 30 September 2013 / Published in Uncategorized

key metrics for online advertisements

Today I will cover key metrics and terms that every eCommerce business owner should be familiar with. My goal with this article is to introduce you to different forms of online advertising and the strengths and weaknesses of each. We’ll also cover how to measure the effectiveness of each one.

CPC cost per click

Popularized by Google, Cost per click is a method of advertising where you pay based on the number of times a customer clicks on your ad. The exact cost per click is actually calculated based on the highest bid, and the bid of your greatest competitor. Take the highest competitor bid on your keyword, then divide it by your bid, add .01. The number you get should be the actual CPC of your ad.

In order to evaluate how effective your CPC marketing is, figure out how to get the most out of it, and find out where your ROI is coming from it is important to realize exactly what you are paying for using this method. You are essentially buying visits to your website. But it is important to consider how those visits are effecting your website. So it is imporant to keep track of the percentage that these visits result in sales.

In order to reduce expenses and maintain value of reach click there are a couple of things you should keep in mind.

First, what keywords most or least are you using?

Some keywords may be overpriced and there may be alternate keywords that you can use that may attract the same or greater attention. This may take some experimenting but it important to conduct some keyword research to figure out which ones will turn out to yield the highest ROI for you.

High quality score

You also want to make sure that you are not “cheating the system”. Proper adherence to search engine policies will help you gain discounts on popular keywords that you have bid on. These discounts can be extremely valuable as you grow and expand your online business.

CPM cost per thousand

CPM is the cost per thousand impression. The M actually represents the roman numeral for the number one thousand. So in this case, instead of paying for each click you are paying for each one thousand times your ad is shown on a website. When using this method of advertising it is best to use clickable banners that attract attention and include your brand name. Remember that simply reminding people that your exist with your brand name is effective in itself. If brand awareness is your goal, then this should be the preferred choice of advertising for you, because that is essentially what it does.

CPA cost per acquisition

Cost per action or acquisition advertisements differ from CPC and CPM in the aspect that they are more results driven. Rather than paying for every single click you are only paying if the customer fulfills a desired action such as filling out a form or completing a sale. This option becomes available through the Google Conversion Optimizer by checking a box in the settings.

However, if you are having trouble finding this option it may be because you do not qualify yet. In order to qualify you must fulfill these two standards:

  • Enable AdWords tracking
  • The ad campaign must receive a minimum of 100 conversions in the last 30 days.

After the tool has been utilized you must continue to bring in conversions at a similar rate, otherwise the option will be removed. So as long as you enable AdWords are consistent with sales you should be able to keep the option of CPA.

Qualifying for this is a pretty good indication that it would be beneficial. Because you can then have much more effective ads and your ROI rates will be much easier to track. But this method will also be useful if you want to avoid managing bids on CPC keywords and have already determined what your conversion value is (conversions are worth $X, so I’m willing to spend $Y)

CPV Cost per view

YouTube and other video sites have become one of the newest form of online advertising. It is a form of advertising that business owners are still experimenting with to find out which types of ads are most popular and yield the most ROI. These ads might require a bit more cost to make due to the fact that you’ll have to produce a short video rather than an automatically generated text ad that you would get from a CPC keyword. However, they may prove to be well worth it as YouTube genrates thousands of visitors per day. Because the CPV method is similar to that of a cable television ad you’ll want to use them a bit like CPM advertising, brand building.

If you are still on the fence about whether or not to use CPV advertising check out this list of highest subscribed channels on YouTube. You might try taking a look at the top ten, notice what these channels have in common. A majority of the most popular channels on YouTube are video game related right now. This is due to several factors that I wont get into right now, but the fact that this is the case tells you that if you run an eCommerce business that has to do with video games CPV advertising might prove to be extremely profitable for you right now.

Of course these things are always subject to change as people discover the true effectiveness for CPV marketing so make sure you stay up to date with the trends. But that should go with just about any other type of marketing.

Measuring the results

Bounce Rate

Bounce rate measures the amount of times someone visits a web page and exits without viewing any other page. Will help you measure the effectiveness of CPC marketing or any paid search campaign. It will also help you analyze how effective specific pages are in directing customers toward a desired action. Examining which pages have higher bounce rates than others can help indicate which areas of the site you need to improve. However, bare in mind that some pages may have a higher bounce rate simply because they receive more visits from CPC ads.

A bounce rate above 60 or 70 percent on your home page is defiantly a huge clue that changes need to be made. Look at the keywords people used to find those pages and find out if those keywords are relevant to the page. If they are not you might want to edit the copy on that page so that it doesn’t use as many of those words. Try to use more keywords that pertain to your webpage in order to attract relevant clicks.

A low bounce rate may also indicate a low level of engagement. One of the things that can cause this is online advertisements that do not match the page that the ad redirects customers to. A good way to keep this consistent is to put yourself int he customers shoes. Think about what information they are seeking, how they will perceive your ad, and what other content you could include in alternate pages in order to peek their interest and keep them engaged.

Exit Rate

While bounce rate is a measurement of how many users leave after viewing only one page, the exit rate is an all encompassing measurement of how many users leave no matter what level of engagement they invested in on the webpage.

Exit rate can tell you if the website is being effective in general. It does this by showing you what page the user decided to leave on. However, you should look at exit rate pretty lightly and not let it influence too many of your optimization decisions. This is because of situations where a customer gets to the order page, completes a sale, but then clicks on another item of interest, and then leaves. In this instance website still accomplished what you wanted it to do in the session even though the customer left on a different page than you would expect. Also in situations where a customer visits the website, ads items to a cart, and leaves. The website still accomplished what it was meant to do because that is a session that will likely lead to a sale. So when looking at exit rates also consider the specific sessions customers were engaged in. In general it’s not something you should worry about unless there are other indications that the websites optimization is poor, like lack of sales paired with high bounce rate.

Abandoned shopping cart

Abandoned shopping carts are another element of web analytic that all eCommerce business owners should definatly keep an eye on. You should defiantly be taking efforts to help decline the amount of abandoned shopping carts. In a study done by the Baymard Institute, 67.45% of all online shopping carts are abandoned. That is quite a bit of revenue you are loosing every day. Of course, there are always the cases where customers return later to complete the purchase. But the Baymard Institute linked the highest instance of shopping cart abandonment to the fact that users are presented with unexpected costs. Other popular reasons were that they were simply browsing, found a better price elsewhere, or the customer simply felt that the overall price was too expensive.

As a business owner, some of these things you can do little about, but you can at least try to prevent people from leaving due to unexpected charges by including tax or shipping costs immediately. However, this can be difficult to do on the internet since you will receive customers from different parts of the country or different parts of the world. But one thing you can do to make things easier is include free shipping.

An article at Shopify.com breaks down abandoned shopping carts perfectly and gives some excellent tips on how to reduce the amount of these you’ll get on your website, check it out! In general, it seems that following standards to make your website look more credible can help reduce the amount of abandoned shopping carts. So show images, display security logos, offer support, and different payment methods. Also avoid registrations and make editing the cart easy, this will avoid frustration and keep the customer going through the process without any hassle.

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