The most effective digital marketing campaigns are backed by rigorous research and structured according to tangible goals. Often called benchmarks or key performance indicators (KPIs), these metrics are essential for defining the parameters of a digital campaign, planning creative, seeking advertising budget, and determining success post-campaign. In the long run, effective digital marketing depends on constant iterative improvement and refinement of branding strategies and tactics. A strong working knowledge of the most important and commonly used benchmarks in digital marketing will help brands identify the most effective elements of their advertising and optimize campaigns for future efforts.
To help marketers more effectively manage their advertising budget, we created this advertising KPI benchmarks report using data collected from serving thousands of brands across industries. In this report, we will cover 3 common advertising KPIs (CPM, CPC and CTR) and 2 types of campaigns - retargeting and brand awareness.
A Primer of Advertising KPIs
More commonly known cost per thousand impressions, CPM is a metric typically used to measure campaigns intended to reach very wide audiences and increase general brand awareness. CPM is calculated with this formula:
CPM = Advertising cost / 1000 Impressions
As CPM is measured using impressions rather than clicks, it’s an effective tool for boosting brand recognition. In cost-per-thousand-impressions marketing, the brand can purchase a large number of impressions without worrying about costs increasing when users click through.
One of the most common campaign styles, cost-per-click (or pay-per-click) refers to the amount charged by an ad publisher (such as Google AdWords) when a web user clicks on an ad. Cost-per-click is determined by the value and competition around the click action of an ad, and often involves a process in which brands secure keywords or display location for campaigns by bidding on them. As there is no up-front cost to the brand for running their ad until a click is triggered, CPC advertising has a side benefit of boosting brand awareness through “free” impressions.
CTR: Click-through rate
Click-through rate is another important indicator of a campaign’s effectiveness. It measures the percentage of impressions on an ad that converted into a click—essentially, the portion of web users who saw the ad and actually interacted with it. Click-through rate is often used as a baseline measure of a campaign’s ability not just to generate brand awareness but to push users further down the conversion funnel and encourage purchases. Because web users are constantly inundated with digital ads, a strong click-through rate could be as low as 0.2%.
Retargeting vs. Brand Awareness Campaigns
While branding strategies in the world of digital advertising take many forms, there are two broad categories of campaigns that are especially important for brands to learn: retargeting campaigns and brand awareness campaigns.
A retargeting campaign seeks to generate conversions and revenue from consumers who have already demonstrated some kind of interest in a brand or its products or services. The main drive of a retargeting campaign is to present offers or products that reflect the interests of the customer, which can be determined by analyzing shopping behavior. Retargeting can occur after virtually any interaction between a customer and a brand, and is often deployed in these circumstances:
- Customer makes a purchase on a brand’s digital shop. Retargeting could provide the customer with products related to the one they already purchased. Customer browses a web shop, then leaves without making a purchase. In this case, the brand could retarget by providing links to alternate products or by offering shipping discounts or other incentives to convince the customer to complete the sale.
- Abandoned cart recovery: Since shoppers often use the shopping cart function as a “wish list” or a way to compare several products at once before purchasing, shopping carts are abandoned without a purchase being made at least 80% of the time. These abandoned carts represent huge amounts of uncaptured revenue. Smart marketers will use retargeting to remind the customer that they have items in their shopping carts, often providing a discount code or other incentive to bring the shopper back to complete their purchase.
This chart shows the average ranges of CPC, CPM and CTR we saw in Q4 2020 for various industries. Select the industry that is most relevant to yours from the dropdown menu.
Brand awareness is one of the most fundamental measures used by digital marketers. It represents the extent to which a brand’s target audience is knowledgeable about the brand’s products, mission and voice. Brand awareness campaigns help brands reach new audiences using various targeting methods, including demographics and interest, contextual and lookalike.
Demographics and Interest Targeting
Demographic targeting seeks to engage users whose demographic traits match those of customers who have demonstrated interest in a brand. For demographic targeting purposes, customers may be segmented by age, gender, marital status, geographical location, education level, income level or many other traits. This allows marketers to craft messaging specifically tailored to these audience segments and deliver highly personalized campaigns.
Interest targeting essentially performs the same function, instead segmenting consumers by their personal interests, such as fitness, food and drink, travel, sports, and many others.
Contextual targeting is a highly effective means of reaching new visitors by placing brand content alongside other content that is related or complement to the brand’s products or services. Unlike other targeting methods, contextual targeting doesn’t use any user attribute or behavior data. Marketers choose where to place their ads based on the relevance of content on the other sites. For instance, a campaign utilizing contextual targeting might present an ad for a high-end running shoe within blog content about how to train for a marathon.
A brand’s target audience contains its most high-potential customers, determined by browsing and shopping behavior data. Lookalike targeting is used to reach new customers with whom a brand has not already interacted or captured, but who share interests and behavioral patterns with the brand’s most high-value customers: those who have already made purchases. Generally, brands should use high-level messaging and creative that reflects the business’s values and style in order to generate interest from new customers and introduce them to the brand’s digital ecosystem. Lookalike targeting is usually automated using AI.
This chart shows the average ranges of CPC, CPM and CTR we saw in Q4 2020 for various targeting methods. Select the targeting method in which you’re interested from the dropdown menu.
How much should I spend on digital ads?
Finding the right balance of ad spending is key to growing a new brand, and marketers with limited resources need to maximize the return on every dollar of their budget. This involves finding the right mix of paid ads, organic search optimization, social media, and other channels to capture the brand’s specific target audience.
AdRoll has created a calculator that uses our rich collection of industry benchmark data to determine approximately how much a brand of any size or type should expect to spend on digital marketing in order to see growth. Calculate Your Advertising ROI