Businesses are increasing marketing spending in a bid to stand out in highly competitive environments. As spend increases, executives and decision-makers must ensure that each dollar spent on marketing generates proportionate revenue for the business.
Click-through rate (CTR) is a metric that is regularly used by businesses to analyze marketing performance and determine future marketing strategies. However, understanding of CTR remains woefully inadequate. Read on to learn what CTR is and how analyzing it can help businesses achieve short- and long-term marketing success.
What is CTR?
Businesses often track how many users view and interact with a particular ad or social media post. CTR is the metric used to measure the percentage of viewers who click the link embedded in that ad or post. CTR is used to determine how well an ad, keyword, or social media post is performing.
CTR can easily be calculated by dividing the number of clicks that each ad receives by the number of impressions or views the ad has and representing that number as a percentage. For example, if 10 people click on an ad that was viewed by 100 people, the CTR of that ad would be 10%.
Companies can evaluate their CTR against the performance of other ads from the same industry. For example, ads from companies in arts and entertainment average a CTR of 10.67%, while ads for legal services experience an average CTR of 3.84%. Knowing how your industry typically performs helps put your performance metrics in the right context to evaluate them accurately and effectively.
What marketers must know before they can effectively analyze Click-Through Rate
Higher CTR does not necessarily mean positive marketing results
Results generated by marketing efforts may seem difficult to measure, quantify, or link to specific business results. However, this is often due to a misunderstanding of how each metric reveals specific insight into marketing performance.
Marketers must have specific goals and must choose the right metrics to evaluate if these targets are being met. Marketers who focus heavily on conversions might use CTR to view how effectively each ad is being used to increase visibility—but CTR does not measure how many of those clicks lead to conversions.
Keywords are valued differently depending on their ability to directly generate profits
Keywords play a major role in the CTR of an online ad. The right keywords can encourage more clicks, higher conversions, and better engagement with the ad. However, every keyword has a unique value within each industry depending on how effective they are in generating profits, so marketers must carefully evaluate how keywords are valued in their specific industry.
Industry research showed that marketers typically use keyword rankings, organic traffic, and time spent on the page in conjunction with CTR to measure the value of each keyword. This information can then determine how much of the budget should be spent on each set of keywords and how frequently they should be used in marketing campaigns.
CTR must be analyzed through the lens of affordability and relevance
CTR can provide significant insight into marketing performance for digital marketers. However, it should always be analyzed with the specific financial needs of the campaign. Even if an ad converts a customer, the profit generated by the customer must be higher than the amount of money the marketer spent to get that click.
3 Ways to achieve consistently positive business results in an increasingly saturated online space
Segment keywords into groups to enable improved Audience targeting and segmentation
Businesses can use many keywords across different marketing campaigns and channels to better reach a wider audience. Each of these channels must be properly evaluated to truly understand their importance to the company. Marketing spending on each channel must accurately reflect its importance to marketers and their audience.
Park ‘N Fly, an offsite airport parking company, used keyword segmentation and optimized paid-search spending to double their CTR to 6% from 3% the previous year with the use of Marin Professional. Effectively analyzing CTR helped them optimize spending across 65 campaigns that used 2,000 keywords across multiple channels and platforms.
Ensure consistency in messaging across ad text, marketing collaterals, and landing page copy
Once you’ve figured out how each keyword performs, it’s important to use the same keywords to reach that audience effectively across different channels. This also ensures that the marketing message is not diluted or forgotten when viewed on platforms that deviate from the language that was determined to be effective. This consistency has to extend beyond ads to marketing collateral such as email blasts, promotions, and landing page copy.
Regularly analyze the links between keyword usage and business results with modern attribution analysis methods
The modern customer demands that companies learn their preferences quickly and expects communication that aligns with their values, beliefs, needs, and preferences. This means marketers must always have their finger on the pulse to learn when customer preferences have changed. Attribution analysis can help businesses understand if their keyword usage and ad language have kept up with changing customer behavior and the extent to which certain keywords are still relevant to existing marketing campaigns.
Manage your ads with insights from MarinOne
Marin’s online ad management software makes it easy for marketers to learn how their ads are performing and place that information in the right context. Analyzing the yield generated by each keyword, ad, copy, and product can help marketers optimize their ad spend in a way that maximizes conversions and sales.