Evaluating paid media performance is arguably the most important evaluating Acquisition Channels, including paid media performance, is a crucial skill to master as a media buyer. Without these skills determining what tactics are driving your business is extremely difficult. When you are able to decipher what is working and what is not, you can unlock expansion opportunities, understand where you can scale, and overall drive growth for your business.

Why we evaluate acquisition performance

Evaluating paid media performance is essential for both future marketing performance as well as informing the business where there is room to expand and what products, channels and markets are going to drive growth overall.

Evaluating Performance for Future Marketing

Evaluating performance of your acquisition channels not only fuels optimization efforts but tells you where you should allocate your ad dollars and where you should scale back. By looking at specific KPIs that are determined specifically depending on the business and its objectives you can start to understand what is driving the strongest performance. KPIs that indicate success and fuel marketing direction should be pre-determined when starting a campaign. If there is no prior data, leveraging industry benchmarks is a good start. If there is significant business data, that is a better place to start. Your KPI goals for metri. s like CTR (click-through rate), CPA (cost-per-acquisition) and ROAS (return on ad spend) should be measured by profitable returns.

Evaluating Performance for Business Growth and Decisions

Paid media performance can be a quick revenue driver for businesses and can deliver key insights into their customers. By measuring what products users are buying first a business can identify where they need to allocate resources to build up new acquisition. Forward looking businesses should consider revenue long-term after the initial acquisition. It is important as a decision-maker to see not only what products your customers are buying first but what initial product purchases indicate an increased lifetime value. For example, a shoe company might determine that sneaker A and Sneaker B are both fairly equal in overall effectiveness in driving first-time customers. However, Sneaker A only drives an LTV of $85 vs sneaker B which drives an LTV of $175. Understanding these differences can identify product features that are likely to lead to more purchases over time. In addition, it can shift the way a business develops products based off what their customers consider to be more valuable.

Statistical Significance

Statistical significance is a term used to represent when a test has actually proven to be more or less effective than the control. You can measure statistical significance either with manual statistical equations or you can use a statistical significance calculator to determine if your tests have actually proven successful or not.

Understanding statistical significance is important to ensure that you’re moving in the right way and not ending a test too early. The fact is, is that sometimes ads, audiences etc. get some purchases, see high ROAS, etc. early on and people may take it and act way too early on it. In all reality, random purchases and clicks happen so it is important to gather enough data and make sure that your test has proven a level of statistical significance that warrants action.

How to analyze and action off of specific metrics

AOV

AOV refers to average order value and shows how much on average each customer is spending with your business per order. Low AOV can signal that people might not be purchasing enough products per visit or that your products are priced too low. Through detailed conversion rate and optimization tactics, you can work to increase average order value by incentivizing larger purchases with free shipping and free gifts, by bundling specific products, or buy even raising the price of your products.

ROAS

ROAS, or return on ad spend is a metric that is most often looked at by business owners and media buyers alike. Return on ad spend, is a measure of how profitable your ads are. Return on ad spend is calculated by dividing your total sales by the amount of money you’ve spent on ads. Although an important metric to determine success on unpaid media platforms, it is often used as the end all be all for success. Sometimes having a very high ROAS, although it looks good on the platform, can actually be a sign that you’re limiting the potential to scale your revenue.

CVR

Conversion rate is a metric that measures how many people who visit your site actually make a purchase. Conversion rate can be measured in a number of different ways, but the best way to measure your conversion rate is conversions divided by traffic. Conversion rate is often a problem amongst a large variety of business owners, and determining why conversion rate may not be high can be difficult. There are a lot of factors that go into higher conversion rates. Irrelevant audiences are likely to convert at a lower rate than higher relevant audiences. Some websites might be the cause of low conversion rate as well. Slow site, speed, poor landing pages, and products that don’t resonate with users are all potential issues to low conversion rates on site. In order to work towards an increased conversion rate, you need to make sure that one you’re targeting people who are most likely to purchase your product, which can be much easier said than done and is determined through a wide variety of audience testing in conjunction with ad testing. Conversion rate optimization is an optimization process that tests multiple variables to work towards an increased conversion rate. Making sure you’re constantly checking website performance, including landing page bounce rates and other metrics can help identify opportunities to improve your conversion rate.

CTR

Click through rate is a key metric in paid media, and one that can signal the effectiveness of your ads, keywords, and audiences on the platform. High click-through rates are a good signal that your ads are resonating well with your audiences or that there's an interest in the product you're advertising to them.

Click through rate is measured using the following formula: clicks/impressions=CTR. When determining if your click through rate is optimal or not, it’s important to check out specific benchmarks for your platform. You can often find platform benchmarks by searching them online and seeing what is normal for your industry.

CPA

CPA stands for cost per action or cost per acquisition and it’s something that is measured to understand how much it cost the business on platform to drive a conversion. CPA can be a direct representation of other metrics like click through rate conversion rate, CPM, and cost per click. CPAs can often be a target to achieve a specific profitability for each purchase. Some platforms allow us to target specific CPAs and work towards those goals. CPA is a crucial metric that is often looked up by business executives as a sign of efficiency. By lowering CPC is increasing CTRs, lowering CPM’s, and increasing your conversion rate you are likely to see a reduction in CPA.

CPC

Cost per click is a measurement of how much you pay every time somebody clicks on your ad. Whether you’re bidding on CPM’s or CPC’s, you will often still look at this metric to determine if you’re spending too much or too little. On Google cost per click can be reduced by either bid adjustments, changes in your ad rank or targeting less competitive keywords.

CPM

CPM stands for cost per thousand impressions and is an extremely important metric on platforms that use it for bidding. When you have high CPM’s this directly relates to your bottom line profits. In order to maximize profitability while keeping other metrics like conversion rate and click through rate constant or increasing, it’s imperative to make sure CPMs are as low as possible to ensure that sales will be profitable. If CPM’s are high for your industry, you will need to focus on maximizing click through rate conversion rate, and average order value to make sure that conversions are profitable.

Effectively evaluating paid media performance is essential for media buyers aiming to drive business growth. By understanding key metrics like AOV, ROAS, CVR, CTR, CPA, CPC, and CPM, you can discern which strategies are most effective and where there's potential to scale. A focus on these metrics, coupled with an appreciation for statistical significance, ensures that marketing decisions are data-driven and grounded in reality. This strategic approach not only optimizes ad spend but also identifies expansion opportunities, paving the way for sustained business success.