We use our expertise to answer your question.
The answer? It’s better to rely on metrics that provide you more of a detailed look into what’s happening with your businesses products and services, such as metrics like cost per mille (CPM), click-through rate (CTR), average order rate (AOV), and conversion rate (CVR).
Still, ROAS (return on ad spend) remains a popular metric that many businesses use for paid social, but challenges can arise when you rely solely on ROAS to measure success. However, using the following metrics can give you better insight into your overall account performance.
Cost per mille (CPM)
- What is it? Calculates total price an advertiser pays per 1,000 ad impressions
- How do you calculate CPM? 1,000 * Total Ad Cost / Total Ad Impressions = CPM
- Why is it important? CPM helps define the cost of ad space, so you can understand if your campaigns are profitable and meeting the expectations of your target audience
Click-through rate (CTR)
- What is it? Measures how many people click on your ad
- How do you calculate CTR? # Ad Clicks / # Ad Impressions = CTR
- Why is it important? CTR helps you understand the level of interest your brand, products, and or/services have across various content and ad placements
Average order rate (AOV)
- What is it? Tracks the average amount of dollars spent each time a customer places an order
- How do you calculate AOV? Total Revenue / # Orders = AOV
- Why is it important? Tracking (and optimizing) AOV can help you significantly improve profitability
Conversion rate (CVR)
- What is it? Measures how many people are persuaded to make a purchase based on their engagement with your brand, such as watching a video ad on Instagram or clicking through a product ad on Facebook
- How do you calculate CVR? (# Conversions / # of Actions) x 100 = CVR
- Why is it important? CVR indicates if your brand is driving leads and sales from your marketing efforts
There are many other metrics (besides ROAS) that you can use to improve your paid social accounts’ performance, and help drive sales and overall profitability. If you’re unsure where to start, reach out to our experienced Paid Social & Creative team to learn more.
