Navigating the vast world of e-commerce requires a blend of creativity, strategy, and a deep understanding of the data driving your results. With PPC campaigns being a cornerstone of online marketing, it’s crucial to understand the numbers that gauge their effectiveness. Here are 20 formulas, with illustrative examples, to help you decode your campaign’s performance.
1. Return on Advertising Spend (ROAS)
- Formula: Revenue from Ad Campaign / Cost of Ad Campaign
- Example: If you spent £1,000 on an ad campaign and generated £5,000 in sales, your ROAS would be 5 (£5,000 / £1,000).
2. Conversion Rate (CR)
- Formula: Total Conversions / Total Visitors × 100
- Example: If 50 out of 1,000 visitors made a purchase, your CR would be 5% (50/1,000 × 100).
3. Cost Per Click (CPC)
- Formula: Total Cost of Campaign / Total Clicks
- Example: If you spent £500 on an ad campaign that received 1,000 clicks, your CPC would be £0.50 (£500 / 1,000).
4. Click-Through Rate (CTR)
- Formula: Total Clicks / Total Impressions × 100
- Example: If your ad was shown 5,000 times and received 250 clicks, your CTR would be 5% (250/5,000 × 100).
5. Cost Per Conversion/Acquisition (CPA)
- Formula: Total Cost of Campaign / Total Conversions
- Example: If your campaign cost £1,000 and resulted in 50 sales, your CPA would be £20 (£1,000 / 50).
6. Average Order Value (AOV)
- Formula: Total Revenue / Total Number of Orders
- Example: If your total revenue for the day was £2,000 from 40 orders, your AOV would be £50 (£2,000 / 40).
7. Customer Retention Rate (CRR)
- Formula: (End of Period Customers – New Customers) / Start of Period Customers × 100
- Example: If you started the month with 100 customers, gained 20 new ones, but ended with 110, your CRR would be 90% [(110-20)/100 × 100].
8. Net Promoter Score (NPS)
- Formula: % of Promoters – % of Detractors
- Example: If 70% of respondents were promoters and 10% were detractors, your NPS would be 60 (70-10).
9. Gross Margin
- Formula: (Total Revenue – Cost of Goods Sold) / Total Revenue × 100
- Example: If you made £5,000 in sales but the products cost £3,000, your gross margin would be 40% [ (£5,000-£3,000) / £5,000 × 100 ].
10. Ad Position
- Formula: (Total Impressions – Impression Share Lost due to Rank) / Total Impressions
- Example: If your ad had 8,000 impressions but lost 2,000 due to rank, the average ad position would be 0.75 (6,000/8,000).
11. Impression Share
- Formula: Impressions Received / Total Eligible Impressions × 100
- Example: If your ad was shown 4,000 times out of a possible 10,000, your impression share would be 40% (4,000/10,000 × 100).
12. Quality Score
- Calculated by platforms like Google, it considers click-through rate, ad relevance, and landing page experience.
- Example: If Google rates your ad 7 out of 10 based on the above criteria, that’s your Quality Score.
13. Cost Per Mille (CPM)
- Formula: Total Cost / Total Impressions × 1,000
- Example: If your ad cost £200 and got 50,000 impressions, your CPM would be £4 (£200/50 × 1,000).
14. Customer Lifetime Value (CLV)
- Formula: (Average Purchase Value × Purchase Frequency) × Average Customer Lifespan
- Example: If a customer spends £50 three times a year for five years, their CLV would be £750 [(£50 × 3) × 5].
15. Shopping Cart Abandonment Rate
- Formula: (Total Abandoned Carts / Total Initiated Transactions) × 100
- Example: If 60 out of 200 initiated transactions were abandoned, the rate would be 30% (60/200 × 100).
16. Return on Investment (ROI)
- Formula: (Net Profit / Cost of the Investment) × 100
- Example: If you made £5,000 net profit from a £2,000 investment, your ROI would be 250% [(£5,000-£2,000)/£2,000 × 100].
17. Product Listing Ad (PLA) CTR
- Formula: Total Clicks on PLA / Total PLA Impressions × 100
- Example: If your product ad had 2,000 impressions and got 100 clicks, the CTR would be 5% (100/2,000 × 100).
18. Revenue Per Click (RPC)
- Formula: Total Revenue / Total Clicks
- Example: If your campaign generated £1,000 from 500 clicks, your RPC would be £2 (£1,000/500).
19. Cost Per Thousand Views (CPMV)
- Formula: Total Video Ad Cost / Total Views × 1,000
- Example: If a video ad cost £500 and received 25,000 views, CPMV would be £20 (£500/25 × 1,000).
20. Bounce Rate
- Formula: Total Single Page Visits / Total Site Visits × 100
- Example: If you had 800 single-page visits out of 2,000 site visits, the bounce rate would be 40% (800/2,000 × 100).
Conclusion Numbers are more than just digits on a screen; they are the lifeblood of effective e-commerce strategy. By understanding and actively using these formulas, you position your business for success, refining your campaigns and maximising your returns. As you delve into the world of PPC, remember that knowledge isn’t just power – it’s the key to profitability.