Every paid search metric promises some degree of success if it’s executed right. But when there are so many different search metrics, how can you tell which one to choose? Should you focus more on cost per conversion (CPC) or return on investment (ROI)?
Each individual metric is appropriate for a certain venture and has its pros and cons. No metric is perfect, otherwise everyone would be using that one and there wouldn’t be any others. An article over at Search Engine Land makes it clear that it’s best to consider all search metrics when setting goals and reviewing your key performance indicator (KPI).
Let’s take a look at the highs and lows of Return on Investment, Advertising to Sales and Average Order Value.
Return on Investment
How much revenue have you made after all your expenses? ROI is a crucially important factor in any financial undertaking, because it bluntly communicates to you whether or not your venture was worth it. If you spend $2,000 on an investment and only make back $1,000, your revenue is half what you spent.
Advantages: ROI accurately gauges your account performances. When it comes to the bottom line of how your business is doing, your revenue makes that immediately clear.
Disadvantages: Singularly focusing on ROI can limit the growth of your business. Making good returns on sales may blind you to other strategies you could take, such as risking more customers or losing a little money by cutting out some of the work you’re doing.
Advertising to Sales
The advertising to sales ratio measures the effectiveness of an ad campaign. Calculating the ratio will give you a percentage indicating the efficiency of a singular ad campaign.
Advantages: Everybody needs to advertise. It is a necessary part of business and, if you play your cards right, it can promise huge returns and put your product on the map. In the world of SEO and internet marketing, advertising has changed a great deal. Social media campaigns and ads disguised as content dominate a more savvy, TV ad-weary market. If you take advantage of this instead of rejecting it, you could find yourself not only improving in leaps and bounds but enjoying the creative aspects.
Disadvantages: The effectiveness of advertising to sales all comes down to how much time and effort you’re putting into the campaigns. Advertising can disappear into a void because there’s so much of it, so you need to keep a close eye on the expenses throughout your campaign.
Average Order Value
A lot of factors go into the average order value. Simply put, it tells you how much customers are spending per purchase. 10 orders at $1,000 means the AOV is $100.
Advantages: AOV is good for benchmarking efforts. Setting a goal in mind of how much you want to make out of sales and hitting that mark will tell you the product is as popular as you expected, the ad campaign works and people will probably keep buying it.
Disadvantages: Despite a good reading of short-term goals, AOV can make it easy to disregard total revenue accrued. Few orders can often result in a better AOV if you look at the final revenue and assess it properly. All of these strategies are effective methods of running a business. The important thing is to consider each one individually and to not get caught up in making one work and ignoring the others.