Top 4 Return on Investment (ROI) Advertising Metrics You Should Know

Any time you are setting up your advertisements, you are doing so with the intention of getting a sufficient return on the investment. Any ad is set up with the hope that the targeted audience will see the advertisement either through a display or through search and will be prompted to click on the call to action (CTA) and either sign up, call, or enquire in any other way that is set up in the CTA.

The following metrics are critical to determining whether you are getting a return on your advertising investment.?

1. Cost per lead?

A lead is anybody who is interested in the product or the service being offered or being positioned by the advertisement. Leads can be broken down into general leads and quality leads. General leads are the total number of leads generated by the ad. Quality leads are those leads with the potential to convert and become customers in the shortest time. Knowing your cost per lead will help you determine your future budgets.?

2. Customer acquisition cost/ Cost per acquisition?

Customer acquisition or otherwise known as acquisition cost is the actual cost of a customer that has been converted. This is not a cost on a lead which could be a potential customer but rather an actual customer emanating from an Ad.?

3. Lifetime value?

The customer lifetime value is the total economic contribution or economic value of the already acquired customer to the business. If a customer comes into the business and subscribes to a service for 12 months, then their value would be the acquisition cost less the expenses including expenses incurred in the delivery of product or service for the total duration of their existence in the business. Businesses can justify client acquisition costs and load generation costs by the total lifetime value of customers.? Customers who tend to stay longer and pay more have a higher lifetime value to the business. When considering the lifetime value of a customer, it is also important to consider the number of referrals that may be generated by the same customer. So, a business may benefit by investing in a higher initial cost of acquisition if it will have a greater lifetime value customer.

4. Retention Rate

Retention rate is the rate of converted customers who remain with the business up to the threshold where a business breaks seven or begins to turn a profit. If a business acquires 10 customers or converts 10 customers from a campaign and five of those customers drop off in the first day or the first week, then the business would have to examine why the retention rate is only 50% of the acquisition. This would help the business look at the processes post advertisements and streamline their operations.