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No matter what marketing levers you decide to pull to grow awareness and drive conversions for your brand, you need to measure success. Paying attention to what is working and what is not working is what can help you make the most of your marketing dollars.
And the same goes for when you decide to work with a paid ad agency. You are trusting that agency and their team with your ad spend, and you want to make sure you are getting the best possible bang for your buck. In this article, we’ll let you know what KPIs you should be paying attention to.
What is a Marketing KPI?
First, before we get into that list of KPIs, let’s be sure to align on the differences between metrics and KPIs. Both are tools for measuring performance, but they serve distinct purposes. Metrics are general data points that show what’s happening—think website traffic, impressions, or clicks. KPIs—key performance indicators—on the other hand, are a subset of metrics tied directly to your goals and objectives. They indicate whether your strategy is effective.
For example, click-through rate (CTR) is a metric that becomes a KPI if your goal is to drive website traffic. Similarly, return on ad spend (ROAS) is a KPI when revenue generation is the primary objective. By focusing on KPIs like CTR, CPA (cost per acquisition), ROAS, conversion rate, and impression share, you can gauge the real impact of your ad campaigns on your business goals.
So with that, let’s explore the most important KPIs to measure when you are working with a paid ad agency.
1. Click-Through Rate (CTR)
We talk about CTR quite often in the marketing space, and for good reason. This KPI helps us understand who is taking interest in an ad after they are exposed to it. It is expressed as a percentage and is calculated by dividing the number of clicks by the total impressions and multiplying by 100. CTR reflects how compelling your ad is and whether your targeting is on point.
Why does CTR matter? It gives insight into how well your ad resonates with your audience. A higher CTR often indicates that your ad creative, targeting, and messaging are aligned.
To improve CTR, refine your ad headlines, use eye-catching visuals, and write a clear call-to-action (CTA). Industry benchmarks can vary, but a general standard for a good CTR is around 6.11%. Comparing your CTR against these benchmarks can help guide improvements to your campaign.
2. Cost Per Acquisition
Very few conversions happen organically without any influence. So, it is important to understand how much it is costing you to acquire a customer or lead. Thus, CPA measures the cost of acquiring a customer or lead through your ad campaigns. It provides insight into how efficiently your ad spend is converting prospects into valuable actions, whether that’s a sale, a signup, or another key step.
To make CPA meaningful, it should align with your business's profitability goals. For example, if you’re spending more to acquire a customer than their lifetime value, adjustments are likely in order.
Lowering CPA can often be achieved by refining audience targeting, eliminating underperforming segments, and focusing on the platforms or channels that consistently deliver results. Testing ad creatives and messaging can also help improve results, helping you identify what resonates most with your audience while maintaining a balanced spend.
3. Return on Ad Spend (ROAS)
Next up is ROAS, and this is something you definitely want to pay attention to even when working with the best paid ad agency. ROAS measures the revenue generated for every dollar spent on advertising. It’s calculated by dividing total revenue from ads by the total ad spend. For instance, if a campaign generates $500 in sales from $100 in ad spend, the ROAS is 5:1.
ROAS is a big indicator of financial performance, telling you if your campaigns are profitable. Different business models require different ROAS goals—eCommerce businesses might shoot for higher ratios, while lead generation campaigns may have more modest expectations.
To optimize ROAS, allocate more budget to campaigns that deliver strong returns and analyze underperforming ones to adjust targeting, creative, or placement strategies. Regularly reviewing ROAS helps you make better decisions about how and where to invest your advertising dollars.
4. Conversion Rate
While growing brand awareness is an integral part of your marketing efforts, you eventually want to turn those leads into conversions—paying customers. The conversion rate measures the percentage of ad clicks that result in a desired action, such as a purchase, signup, or form submission. You can determine your conversion rate by taking the total number of conversions, dividing it by the total clicks, and then multiplying the result by 100.
This KPI is important because it reflects how well your ads, landing pages, and offers are working together to drive action. A low conversion rate might indicate a disconnect between ad messaging and the user experience on the landing page.
To improve conversion rates, try A/B testing different elements like landing page layouts, form lengths, and call-to-action (CTA) wording. Compare conversion rates across campaigns and platforms to identify what resonates most with your audience and refine your approach accordingly.
5. Impression Share
Last but certainly not least, you want to measure your share of impressions—aka eyeballs. Impression share measures the percentage of impressions your ads receive out of the total available impressions within your target market. It’s calculated by dividing your impressions by the total eligible impressions and multiplying by 100.
This KPI matters because it reflects your ad’s visibility and competitive presence in the market. A high impression share means your ads are reaching a significant portion of your target audience, while a low impression share might signal the need for adjustments.
To improve impression share, consider increasing bids or allocating more budget to high-value campaigns. Focusing on well-performing keywords and refining targeting strategies can also help your ads appear more frequently in front of the right audience.
Get Started with Paid Ads Today
Paid advertising is a great way to get in front of more of the right buyers for your business. But, managing paid ads takes time and effort that not all business owners can dedicate. That’s why partnering with a paid ad agency such as LAMA Marketing can make all the difference. We’re a full-service marketing agency designed to help small businesses get the most out of their marketing dollars. Ready to get started? Contact us today.
