1 Quality or conversion rates to action
This shows what proportion of visitors from different sources take specific marketing
outcomes on the web such as lead, sale or subscription.
Example: Of these visitors 10% convert to an outcome such as logging in to their
account or asking for a quote for a product.2 Cost (cost per click)
The cost of visitor acquisition is usually measured specific to a particular online market-
ing tool such as pay-per-click search engine marketing since it is difficult to estimate for
an entire site with many visitors referred from offline advertising.
Example: £2 CPC.3 Cost: cost per action or acquisition (CPA)
When cost of visitor acquisition is combined with conversion to outcomes this is the
cost of (customer) acquisition.
Example: £20 CPA (since only one in ten visitors take an action).4 Return on investment (ROI)
Return on investment is used to assess the profitability of any marketing activity or
indeed any investment. You will also know that there are different forms of ROI,
depending on how profitability is calculated. Here we will assume it is just based on sales
value or profitability based on the cost per click and conversion rate.
Profit generated from referrer
ROI = –––––––––––––––––––––––––––––––––––––––––––––
Amount spent on advertising with referrer
A related measure, which does not take profitability into account is return on adver-
tising spend (ROAS) which is calculated as follows:
Total revenue generated from referrer
ROAS = –––––––––––––––––––––––––––––––––––––––––––––
Amount spent on advertising with referrer5 Branding metrics
These tend to be only relevant to interactive advertising or sponsorship. They are the
equivalent of offline advertising metrics, i.e. brand awareness (aided and unaided), ad
recall, brand favourability and purchase intent.6 Lifetime value-based ROI
Here the value of gaining the customer is not just based on the initial purchase, but the
lifetime value (and costs) associated with the customer. This requires more sophisticated
models which can be most readily developed for online retailers and online financial
services providers.
Example: A bank uses a net present value model for insurance products which looks at
the value over 10 years but whose main focus is on a 5-year result and takes into account:
acquisition cost
retention rates
claims
expenses.This is valuable since it helps give them a realistic ‘allowable cost per sale’ which is
needed to get return over 5 years. They track this in great detail, for example they will
know the ROI of a Google Adwords keyphrase against an e-spotting keyphrase and will
then select keyphrase and bid strategies accordingly.CHAPTER 8· INTERACTIVE MARKETING COMMUNICATIONS
Cost per click (CPC)
The cost of each click
from a referring site to
a destination site,
typically from a search
engine in pay-per-click
search marketing.