By Heather Kramer
Let’s start by defining some simple terms:
CPM (cost per thousand): Media term describing the cost of 1,000 impressions. For example, a website that charges $1,500 per ad and reports 100,000 impressions has a CPM of $15 ($1,500 divided by 100).
Impression (also called a “view”): A single display of online content to a user’s web-enabled device. Many websites sell advertising space by the number of impressions displayed to users. An online advertisement impression is a single appearance of an advertisement on a web page.
CPA (cost per action or acquisition): Cost of advertising based on a visitor taking some specifically defined action in response to an ad. Examples of “actions” include such things as completing a sales transaction or filling out a form.
CPC (cost-per-click): The cost of advertising based on the number of clicks received. Total cost of the advertising spent, divided by the number of clicks received during the campaign.
KPI (key performance indicators): Also known as KPI or key success indicators (KSI), these help an organization define and measure progress toward organizational goals.
So, how do these terms work together? What is the best way to measure an online advertising campaign? What variables should you consider before, during, and after your digital marketing campaign?
You will find that online ad delivery costs will range from as low as a $1 CPM to a $50 CPM.
Why is the range so high? Because not all impressions are equal. It is important to discuss with any advertising vendor (direct publisher or reseller) the quality of the impressions you are buying. Are they targeted? How deep is the targeting? Are you buying impressions on a niche website or directly from a publisher? Is there video involved?
All of these variables can drive a CPM rate up. Conversely, you may want to cast a larger net with less granular targeting but more impressions with higher reach and frequency. Depending on your KPI, you may want to flush your campaign with high frequency and reach across a wide market.
CPA or CPC? What is the best way to measure the success of your digital marketing campaign? “In the old days” CPC was the most common way to measure the success of an online campaign. How many people clicked on my ad (driving traffic to my webpage) during a set time, with a set budget and message?
Today, with the advancement in tagging and tracking technology, we can gather valuable marketing data about the customer’s path to purchase (or conversion). We are able to tell if a person saw your ad and later searched it; how many times the person had to see your ad before taking action; and what device is someone using when they see your ads and later when they make a purchase. The technology now exists to be able to KNOW the exact formula required to turn your marketing effort into a sale online.
Tracking “clicks” and measuring CPC is actually counter-productive. Ninety five percent of clickers do NOT convert. Ninety percent of converters do NOT click. By optimizing for “clickers,” many digital display advertisers are literally optimizing away from the sale. Looking at your business KPI’s and measuring/optimizing toward a CPA model is the best way to create new marketing efficiencies with your online efforts. By doing so, you are actually asking (and hopefully answering) the question: “How much money do I have to spend to acquire this customer?” The answer should be a benchmark for all of your other extensible marketing activities.
I look forward to further discussions in 2015 via CBC Magazine. Please submit any ideas or questions for future columns to firstname.lastname@example.org. For more industry articles, videos, and white papers visit Essex Digital Platform.
Heather Kramer is the director of digital media and strategy with Essex Digital Platform.