What metrics should you track when managing your e-commerce ad budget?

Focusing solely on lowering CPC can be misleading. A higher CPC for a high-value audience might deliver better ROI than a lower CPC targeting less-relevant users. So, aligning CPC with customer value is crucial.

I think CTR is very underrated. It's a very strong indicator of Ad campaign performance and effectiveness. Measuring this for success will always be important when determining where you need to improve or where your ads are performing well.? CTR also directly impacts Quality Score in your Google Ads campaigns. Besides, CTR helps you understand your customers. It tells you what is and is not resonating with your target audience. A low CTR could indicate to you that you’re targeting the wrong audience or that you’re not speaking the right language to entice users to click.

Cost per acquisition should be split and measured across three distinct purchase types 1) New Customer Acquisition - Depending on your product or service, your cost for a new customer may be higher than your revenue on the first transaction. When calculating your new customer acquisition budget, consider your LTV. Make sure you can take a short-term loss for a long-term gain. 2) Incremental Sales - How much are you spending for incremental sales for existing and active customers? 3) Winback Sales - Customers who have stopped buying, and you are trying to activate them again. When calculating CPA, consider the costs of - Ads - Promotional / Coupon - Martech Stack - Staff & Agency - Other absorbed costs

When considering your customer's lifetime value, consider the what time range you consider "lifetime". For example, home furnishing and appliance customers might make a purchase every 24-36 months, but a grocery retailer may see a customer 1-2x per week. Understanding your customer's purchase cycle will help you right-size the time frame considered "Lifetime". Brick and Mortar e-commerce companies should also look at in-store purchases in addition to online purchases. One other suggestion when looking at CLV is the referral activity from customers. A customer who makes low-frequency, low-value purchases may be one of your greatest referral sources for higher-value customers.

POAS (Profit On Ad Spend) is a powerful metric for precise product-level profitability calculations in advertising. Unlike its predecessor ROAS (Return On Ad Spend), POAS provides a transparent view of your ads' profitability, considering all costs and order combinations. To calculate POAS profit, you'll need some essential data. Start with your turnover (adjusted for discounts, gift cards, and free shipping thresholds), then deduct product costs, shipping fees, payment fees, and other expenses. The result gives you the gross profit for each order.

Identifying your advertising objective is crucial as ad metrics vary depending on it. Whether it's Awareness, Consideration, Conversation, or Loyalty, it's important to focus on the specific ad campaign you plan to execute. For newly launched brands or products, the primary goal should be to increase product visibility and encourage consideration and conversion. This requires a focus on metrics such as Impression and CTR. On the other hand, for established brands and high-performing products, the main focus should be on generating conversions and building customer loyalty. At this stage, metrics like ACOS, ROAS, and Repeat Customer should be given priority.