Many companies generate their revenue from the sale of products or services that have a more complex buyer’s journey. For these companies, the process of lead capture and nurturing is obviously critical. And, when it comes to the efficacy and efficiency of a marketing campaign, the rubber meets the road with conversion — when a targeted marketing campaign results in a request for information from a legitimate prospect, and, ultimately, a sale.
WHY COST PER CONVERSION MATTERS
Whether the prospect is filling out an online request form, using a website chat feature or calling a phone number found on your website, a customer journey that ends in conversion is the grand prize.
That’s why, for many companies, cost per conversion is the single most important key performance indicator (KPI) to focus on within any campaign. And getting this KPI down to its most efficient iteration becomes the ultimate objective for any campaign optimization effort.
SHOULD GOALS BE SET FOR EVERY KPI?
Let’s look first at a couple of commonly used KPIs — impressions and clicks. Remember, not all impressions and clicks are equal. This makes it possible to game the system by pursuing low quality impressions and clicks to meet campaign goals. Generally speaking, this approach is ultimately pursued at the cost of conversions and overall campaign efficiency.
At the same time, plenty of scenarios exist where the combination of audience targeting, contextual relevance, and premium placement result in campaigns delivering high click-through rates (CTRs), the best quality clicks, and the most conversions. But because the cost of the campaign is also very high, so is the ultimate cost per conversion. Therefore, high quality isn’t necessarily the ultimate path to campaign efficiency.
I think these examples do a good job of illustrating why we shouldn’t set goals against campaign KPIs unrelated to conversion. So if we shouldn’t set goals against them, should we even bother to measure and report on them?
While it isn’t necessary to provide regular reporting for them, I would argue strongly that it’s important to continually measure and record this data so that it’s available for analysis at any time. Plus, more often than not, I use this data to inform the story related to why cost per conversion increased or decreased for a given reporting period. So why not just report on it consistently?
SETTING S.M.A.R.T. KPI GOALS
I personally subscribe to the philosophy of using S.M.A.R.T. goals [Specific, Measurable, Attainable, Relevant (to your ultimate marketing objective), Time-bound]. In case you’re not familiar with S.M.A.R.T. goals, here’s an example for a B2B marketing campaign from a manufacturer of food ingredients:
Target audience: R&D professionals from the top 1,000 U.S. based CPG food and beverage companies.
Campaign objective: Increase awareness and interest related to our new ingredient product among our target audience of food R&D professionals, driving them to our website to learn more and request a free sample by submitting their contact information via our online form.
Campaign Strategy: Utilize trade show signage, print advertising and digital display media to increase awareness and generate website inquiries.
Conversion event: Successful submission of our online inquiry form to request a free sample.
Campaign duration: August 1, 2018–October 1, 2018
Campaign goal: Average cost per conversion of less than $175
S.M.A.R.T. Conversion Goals:
- Specific: Average cost per conversion of less than $175 for the duration of the campaign.
- Measurable: Conversion event measured via pixel fire when submission confirmation thank you page is seen. Total cost per conversion will be calculated by dividing total cost by the total number of conversions received during the campaign.
- Attainable: The most recent prior campaign received a cost per conversion of $196. While $175 will be a challenge, due to recent landing page optimizations and improved campaign targeting criteria, we believe it is attainable.
- Relevant: Attaining conversion/fulfilling sample requests will seed this new product with the most important audience (R&D formulators) impacting product adoption in appropriate new CPG products.
- Time-Bound: Paid campaign August 1 through October 1; will measure form completion/sample requests for the specified campaign duration.
Now match the above with marketing/campaign budget, and you can begin to clearly see and measure cost per conversion. Match cost per conversion with the average order size or value of the order, and you can ladder this up to important sales metrics. Campaign optimization tactics can then also be put in place to deliver more efficient cost per conversion, based on tweaking media choices, schedules, CTAs and so on.
Want to learn more about cost per conversion and other KPIs? Tweet your questions to @cbdmarketing.