Is digital advertising more of an art or a science? Many marketers would say it’s an art: You’re relying on creativity, appealing to human emotions, and weaving in a bit of ingenuity to reach the right audience.
But digital marketing campaigns are also tied to dollars. You can’t just try a bunch of different tactics to “see what sticks,” or you won’t see a good return on investment (ROI).
When you first start with digital advertising, you’ll need to apply some creativity to figure out what works. However, you should also be tracking concrete results so you can refine and improve your approach based on hard data. In other words, you’ll want to bring some science into the mix.
A key performance indicator (KPI) can tell you if you’re on the right track. Over time, your KPIs should show you how you’ve made progress toward your goals — and where to focus your efforts to make future campaigns a success.
KPIs are metrics that can be used to measure the success of your marketing campaigns. While success looks different for every company, it’s usually tied to something quantifiable like customer acquisition, customer lifetime value (CLV), or customer retention rates.
When you track KPIs, you can make more informed business decisions about your marketing budget and digital ad spend. You may realize that a particular marketing campaign didn’t have the desired result on revenue growth. Or, on the flip side, you might find that a certain marketing strategy is very effective at bringing in new customers and boosting sales.
Marketing KPIs can be expressed as a raw number (such as the total number of qualified leads), a dollar amount (such as cost per lead), or a percentage (such as conversion rate or bounce rate).
It’s important to understand how to measure marketing success with your KPIs.
Not all KPIs will make sense for your business. KPIs for a local restaurant will be different from those for a service-based business because the organizations have different goals. Without identifying the right KPIs, you’re wasting marketing spend and resources tracking numbers that don’t have an impact — and potentially missing those that give you the right information.
There’s a difference between a business objective vs. KPI. Your business objective might be to acquire new leads. The associated KPI is the specific marketing metric (or metrics) that shows how your marketing efforts contribute to lead generation — like your total number of leads.
You can read more about relying on data to make informed business decisions in our guide: The importance of data-driven marketing.
If you need to start tracking KPIs for your marketing team and your business, where should you start?
KPIs fall into three main categories: awareness metrics, engagement metrics, and conversion metrics.
Tracking specific KPIs tied to awareness, engagement, and conversion — depending on your short- and long-term business goals — allows you to optimize your ad campaigns and spending for better marketing performance and a higher ROI.
You should do some research on your industry and the size of your business, so you can set reasonable KPIs and goals. The advantage of KPI tracking is that you can shift your strategies based on the results — but only if you’re tracking the right metrics in the first place.
Here are some common digital marketing KPIs and what they measure. We’ve also outlined why you may want to track a specific metric (and why you may not want to track it) to help you determine if it’s right for your business.
Type of metric: Awareness
Impressions refer to the number of times users see an ad. It measures the visibility of your campaign. A high number of impressions indicates increased awareness among your target audience.
Why you might want to track this KPI:
If you’re trying to raise awareness about your business, you want to be in marketing channels that will give you a high number of impressions. You might be trying to increase brand recognition within your local community, so getting in front of your target audience is a primary goal.
If you compare impressions across marketing channels, you can determine where your ad placements are most effective at reaching your intended audience.
Why you might not want to track this KPI:
Impressions alone don’t turn into revenue. If your business goals are conversions, impressions don’t necessarily tell you much. You could be getting a high number of impressions, but for the wrong audience.
Type of metric: Awareness
Unlike impressions, reach refers to the total number of unique individuals who have seen your ad. One person may see an ad multiple times, with each of those instances counting as an impression. Reach helps you understand the actual size of the audience you’ve reached with your ad.
Why you might want to track this KPI:
If you determine that some users are seeing your ad multiple times (that is, if impressions are much higher than reach), it could indicate oversaturation. That means the same users are seeing your ad over and over again, instead of it reaching new users.
You also don’t want to overexpose people to the same ad, which can lead to ad fatigue.
Why you might not want to track this KPI:
Like impressions, reach doesn’t necessarily lead to conversions.
Type of metric: Awareness
If you see an increased number of visitors to your website in a given time frame, it can indicate higher brand awareness. People are interested enough in your business to check out your website.
Website traffic can also be a good conversion metric if users take a specific action, such as filling out a contact form.
Why you might want to track this KPI:
You can track website data based on its source to identify whether specific ad campaigns or marketing channels are sending people to your website.
You can also use analytics on your website to show you insights about visitor behavior. You may find that people spend more time on specific landing pages. Website analytics can also tell you a lot about your website visitors' geographic locations and online behaviors.
Why you might not want to track this KPI:
You need some working knowledge of web analytics and performance assessment platforms like Google Analytics to really dig into your visitors’ online actions and understand whether you’re attracting the right audience through your ads.
While this might be a worthwhile skill to learn for some local businesses, others may find it’s not worth the effort — especially if your web traffic doesn’t translate to conversions.
Type of metric: Engagement
CTR measures how many people clicked on your ad compared to how many people viewed it (expressed as a percentage).
If your CTR is high, it indicates that your ad is relevant and compelling to those who saw it. A click is one step closer to a conversion, since it means the user wants to learn more. A low CTR might mean you have an issue you need to address, such as the ad’s messaging or design.
Why you might want to track this KPI:
CTR is great for assessing a specific ad campaign's success. You can analyze CTR across different platforms or variations of the same ad to see which performs best.
Why you might not want to track this KPI:
If your business relies on foot traffic, CTR may not matter. You don’t need users to click on the ad if the ad displays your business’s address.
CTR also doesn’t measure intent. People may click because the ad grabs their attention, but they are not actually interested in buying or contacting your business.
Type of metric: Engagement
Leads are individuals with purchasing intent who have interacted with your ads.
If your ads are generating leads, it is an indication that you are targeting the right audience with the right offer or promotion. Leads show you who might be ready to convert into customers.
Why you might want to track this KPI:
Tracking leads makes it easier to drive conversions, since these consumers have already expressed interest in your business. If you successfully drive leads, it shows that your marketing efforts are working.
Why you might not want to track this KPI:
While leads are an important piece of the digital marketing puzzle, this audience does take additional interactions, like a phone call or additional touch points, to make a purchase. If you don’t have the time or resources to consistently follow up with your leads, it may not be worth it to track.
Type of metric: Engagement
The cost per click (CPC) is the amount you pay each time someone clicks on your ad. You divide the total cost of your campaign by the number of clicks you received. Tracking CPC allows you to compare costs across platforms and optimize your ad spend.
On some platforms, you may only pay when someone clicks on your ad. You can set a daily budget and pay an amount per click up to the budget limit.
Why you might want to track this KPI:
CPC shows you exactly how much each click from an ad costs you. If you sell a high-ticket product or service, paying a few dollars per click might be well worth the ad spend — even if only a few clicks convert.
Why you might not want to track this KPI:
Cost per click is very effective if you drive people to take a specific action: click on the ad to learn more. CPC isn't an important metric if your primary goal is brand awareness or foot traffic.
Type of metric: Engagement
Social engagement (likes, comments, shares, or other reactions) indicates that the ad resonates with the audience. If your ad includes a video, you’ll also want to track the percentage of the video viewed. A user who watched 100% of the video found it more compelling than a user who watched only 25%.
Why you might want to track this KPI:
In addition to signaling that your ad has captured people’s attention, you can dive into the comments and glean additional insights about your potential buyers. People may comment on the price or your company, which can help you with future ad targeting.
Why you might not want to track this KPI:
Social media engagement can be a lot of work. If you get high engagement on your ads, you’ll want to respond to comments (quickly), and you may not have the time or resources to do so.
It can also highly depend on the platform: one channel may have low engagement simply because users don’t tend to interact much with ads.
Type of metric: Conversion
A conversion rate (expressed as a percentage) tracks how many ad clicks result in a specific action. A conversion might be a purchase from your website, signing up for a subscription, or filling out a contact form. Conversion rates can be an important business development KPI if you’re looking to generate new leads.
Why you might want to track this KPI:
Conversions are closely tied to revenue, which tells you the ROI of your ad spend. It’s harder to track ROI for awareness metrics because you don’t necessarily know if that awareness leads to sales. If your goal is to increase revenue, you’ll want to track conversions.
Why you might not want to track this KPI:
Properly tracking and attributing conversions can be tricky, and you may not have the bandwidth. For example, people may fill out a contact form but never purchase your products or services. You’d have to track the lead all the way through a purchase to know that the person converted from a particular ad.
You may also have lengthy lags between when a prospect sees your ad and when they eventually convert (for example, if you’re a realtor or lawyer), making proper attribution difficult.
Type of metric: Conversion
Cost per acquisition is how much money you spend on an advertising campaign divided by the number of new customers you acquire. You can do this for a specific campaign or calculate it monthly, quarterly, or over some other time period. A lower CPA means a more efficient campaign.
Why you might want to track this KPI:
You can evaluate your spending across different marketing channels. If your CPA is a lot higher in one channel versus another, it’s costing you more to acquire new customers. You’ll also want to be aware of your CPA relative to the costs of your products or services.
Why you might not want to track this KPI:
CPA is only a useful metric if your ads are converting. If you focus on awareness or engagement metrics instead of conversions, you don’t need to track CPA.
Type of metric: Conversion
Your return on ad spend is your revenue from your advertising spend divided by the total cost of the campaign. A higher number indicates a better ROAS.
For example, if you generated $10,000 in revenue and spent $10,000 on ads, your ROAS is 1 — meaning you broke even. If you generated $40,000 in revenue and spent $10,000 on ads, your ROAS is 4, which is pretty good.
Why you might want to track this KPI:
ROAS shows you the direct return of your advertising efforts. You’ll know if your advertising spend is profitable or not. If your ROAS is low, you may need to target your ads better or change something within the ad itself.
Why you might not want to track this KPI:
Like other conversion metrics, ROAS can be hard to track and attribute if you have a lot of offline sales or a lengthy sales cycle.
You should review your ad KPIs regularly. Some results will be obvious right after you’ve run a campaign (such as the total number of impressions), but other metrics can take longer before you start to see results.
Review your past ad performance data to set realistic KPI targets. If you’re running new campaigns, research industry averages to establish appropriate benchmarks for success.
If you’re envisioning the spreadsheet you’ll need to create to track your KPIs and feeling overwhelmed, don’t worry. It doesn’t need to be that complicated. Working with an ad manager makes it easy to track the return on marketing investment within a particular channel.
For example, Nextdoor Ads Manager allows you to create campaigns that target specific demographics, such as age, household income, or interests. From there, our dashboard gives you an overview of all your KPIs, including impressions, CTR, CPC, leads, and more.
With Nextdoor, you can reach a high-intent, highly engaged local audience. Sign up for a free business account to begin exploring Nextdoor Ads Manager today.