Clickthrough rate (CTR)

Clicks ÷ impressions = CTR

The number of clicks that your ad receives divided by the number of times that your ad is shown. It’s important because it tells you what messaging is resonating with the target audience.

Conversion rate (CVR)

Sales ÷ total number of ad clicks = CVR

The average number of conversions per ad interaction. It’s helpful in comparing the performance of different advertising channels.
‍

Cost per acquisition (CPA)

Total advertising cost ÷ number of new customers = CPA

The total cost to acquire a single customer. This is vital to make sure that your cost to acquire new customers is less than the revenue generated from each one,

Marketing efficiency ratio (MER)

Revenue ÷ total spend

Total sales revenue divided by total marketing spend. This will help you make future planning decisions about marketing spend.

Return on marketing investment (ROMI)

[((number of leads x lead-to-customer rate x average sales price) - cost or ad spend) ÷ cost or ad spend] x 100

The return on the total investment in your marketing efforts. Ensures your budget is working as hard as it can to generate revenue for your business.
‍‍

Average order value (AOV)

Total revenue ÷ number of orders‍

This metric will guide your marketing and pricing strategies.

‍

And finally, the most important metric you need to drive campaign profitability…

Return on advertising spend (ROAS)

Revenue from advertising ÷ cost of advertising‍

Measures the revenue that's generated compared to every dollar of an advertising campaign. 

ROAS only considers direct ad spend, and not any of the other costs associated with your online campaign such as creative, agency fees and so on. As a result you’ll often hear people say “this metric isn’t important because it doesn’t give the whole picture” And that’s true, it doesn’t give the whole picture, and you do need to do work in the background to understand what ROAS allows you to make a profit. But let us explain why ROAS is still absolutely critical to use.

Target ROAS or “tROAS” stands for “target return on ad spend” and falls under Google's category of Smart Bidding strategies. Using Target ROAS as your bidding strategy means the algorithm will adjust bids to maximize the total value of the conversions in your Ad campaigns.

Simply speaking, you need to care about ROAS because the advertising algorithm cares about ROAS and that’s what feeds its decision making.

Now go and have a glass of wine!