How to Define and Measure KPIs for an Advertising Campaign
Sometimes it can be challenging to determine the metrics for an advertising campaign. For small businesses, it’s natural to work with basic indicators. For example, a newly established sole proprietorship wants to launch sales of its products and initiates advertising with the goal of “sales” — this is logical and natural. However, just as accounting transitions from a notebook to a huge Google/Excel spreadsheet, advertising also needs to move from basic sales acquisition to broader and more ambitious goals.
In this article, we will explore how entrepreneurs and marketers can decompose business goals to set appropriate KPIs for advertising campaigns. At the same time, this article will be relevant to marketing contractors on the agency side, helping them better understand client needs and offer relevant solutions.
Three Levels of Setting Advertising Campaign Goals
Every advertising campaign has specific goals that are specified in the advertising account and kept in mind during each optimization iteration. But as marketing contractors or advertising agencies, we don’t simply assign these goals based on the imagination of a media planner, as each campaign should work towards specific business objectives.
When planning a campaign, we first find out what results we need to demonstrate at higher planning levels. So, what are these levels?
- Business Level. The business level defines the overall strategic goals of the company. It’s not just about the basic goal of “making a profit,” but rather more specific objectives like “increasing revenue in a certain region,” “entering a specific country’s market,” or “launching a new product.” The business’s task is to determine the direction that marketers will work towards.
- Marketing Level. The marketing level defines intermediate goals whose achievement will lead to the strategic business goal. For example, if the goal is to increase revenue in a specific region, marketing may propose price increases, attracting new customers, launching a loyalty program (to increase customer lifetime value), or activating existing customers. The task of marketers is not only to choose a path but also to quantify the desired result: how many new customers need to be attracted, what percentage of consumers should join the loyalty program, how many existing customers should be re-engaged to achieve the desired result.
- Advertising Campaign Level. The advertising campaign level is where marketing contractors work. Having a specific goal from the client, digital marketers review the available tools and offer their vision of how to achieve the marketing goal.
In other words, the business determines the direction, marketing chooses the path, and the advertising campaign implements specific steps on that path in the defined direction.
Sometimes a single person or department embodies multiple decision-making levels. For example, in startups, when the CEO takes on the role of the CMO, they set the business objectives themselves and have to find the marketing solution.
In such cases, it is still necessary to decompose the business objective into marketing components to establish specific tasks for the contractor. Or in the case of a marketing specialist in a small company who independently launches advertising campaigns, they have to determine marketing decisions and subsequently set goals for specific advertising campaigns.
In any case, there is a three-level path that KPIs for an advertising campaign go through.
As an agency, we primarily work at the advertising campaign level, analyzing and optimizing it. However, if needed, we can move up to the marketing level and forecast the strategic impact of our tactical actions.
It is important for us to have specific numerical tasks from the beginning, expressed in numbers, so that we can build analytical bridges to them from the advertising campaign. Next, we will consider the step-by-step process of campaign approval.
How to Align KPIs for an Advertising Campaign
In an ideal world, the business would delegate the task to marketing, and they, in turn, would delegate it to the agency, and we would propose a solution that satisfies everyone. However, in reality, things are a bit more complex, and communication follows a spiral pattern.
- For us, as an advertising agency, the alignment process starts with receiving a brief from the client’s marketing team.
- After a detailed briefing, where we learn about the top-level objectives among other things, we prepare our proposal on how to translate them into specific metrics.
- If the proposed direction is satisfactory for the marketers, we calculate how to achieve it. This includes determining the required budget and tools, and the proposal goes back to the business level.
- If the business approves the proposal, we begin working on the advertising campaign. Otherwise, we continue communication until we reach a plan that satisfies all parties involved.
Let’s consider a specific example. Suppose the marketing department of a business comes to us and states that they want to increase the Top of Mind metric. As an agency, we start by clarifying the current metric, the desired growth, and how the client envisions this communication.
We inquire about the target audience and geotargeting. These are standard briefing questions that help formulate the initial campaign strategy. We ask the client to assess the possibilities of advertising campaigns, any ongoing activities, past achievements, and similar aspects.
While it is possible to inquire about competitors’ behavior, it is still necessary to conduct separate research on that. The agency needs to ask the client numerous questions to understand their perspective on the campaign.
There is a delicate stage in this process, which is budgeting. There are two approaches to discussing it: either the client immediately provides the budget, and we formulate the proposal within the given framework, or the client asks us to calculate the cost of services with specific parameters.
At newage. agency, budget calculation is a separate, paid service because our experience shows that “blind” planning requires significantly more time, both during the proposal formation stage and later during the approval process with the client.
Overall, the clarification period concludes with defining the campaign plan and the KPIs that will impact the client’s marketing goal.
Example of KPI definition by an advertising agency
Once we, as an agency, understand the task, have done all the calculations, and aligned the budget, it’s time to determine how we will measure success, and which KPIs to use. In each specific case, the KPIs will be different, and that is normal since they should be tailored to the client’s objectives.
We mostly work with media campaigns that are more complex to measure than performance-based campaigns. However, in the digital realm, we have Comprehensive Analysis and Brand Lift, which allow us to measure things that offline media advertising can only dream of.
Nevertheless, analytics should not be approached recklessly, as each format requires its own set of KPIs. The format is necessary for reaching the audience, audience segments, and specific goals.
For example, if the marketing goal is to build product awareness, in terms of an advertising campaign, we would aim for a certain viewing frequency. Thus, if a user sees the advertisement five times before the brand mention, we can assume that they not only saw the brand but also remembered it, and we can measure that.
However, the effective frequency will differ for different clients. In the article “Brandformance: How to Optimize Media with Performance Tools” we explore the cases of Allo and Rocket, where the former, an established brand, only required one contact with the audience, while the latter, a market entrant, needed at least four contacts for the advertising to be effective.
In the digital realm, we can measure this, and it is a significant advantage.
Example of defining KPI for an advertising campaign
Let’s take an international pizza chain that is expanding to a new location, let’s say Lviv. Our task is to make people start searching for this pizza chain, to let them know that a popular brand has arrived in the city (previously, people didn’t search for it because they knew it wasn’t there).
Our main KPI here is the increase in search queries. For this to happen, our target audience needs to see the advertisement at a frequency of 5. We track the media campaign’s goal and reach at that frequency.
Branching KPIs at the campaign level
The media strategy of a campaign can have different KPIs at different levels. When an ad viewer wants to buy something and is searching for a specific model in a specific color, it means that the person belongs to the hot audience, and the only question is how to catch up with them and sell the desired product at a specific store.
The neutral audience knows that they need a product but is still deciding which one. Here, the task of advertising is to show them a cool option.
The cold audience is simply browsing the internet and is not planning to purchase your product in the near future. However, they might be interested in it later or buy something else from the promoted store.
The KPI will always be different, from visiting the store for the cold audience, getting familiar with the product for the neutral audience, to the actual purchase for the hot audience.
We can measure the media effect and optimize campaigns in a way that the achievement of campaign-level KPIs impacts business-level KPIs.
How advertising campaigns impact business metrics
Once we have defined the overall KPIs for the advertising campaign and for specific audience segments, the question arises of how to verify (or rather confirm) the impact of a particular campaign on global business metrics.
As contractors, we need to build analytics in such a way that the ad views and website visits of the client are linked to conversions and transactions in their own dashboards.
I want to emphasize that this is not about distorting analytics; on the contrary, we are building a seamless analytics bridge so that customers do not drop off and appear out of nowhere at any stage of the sales funnel.
Both the client and we should know that 2 million of the audience reached at a frequency of 5 remembered the brand, and that had an impact on marketing. However, often such end-to-end connections are lacking, especially when it comes to media advertising. Digitized KPIs are required at every level to converge.
How to evaluate the impact of digital advertising on different types of businesses
Clients can have different online or offline representations. There are online-only companies, such as internet stores, and there are exclusively offline stores. However, almost all Ukrainian retail, from small businesses to chains like Allo or Eva, combines offline sales with e-commerce. Let’s consider how to analyze effectiveness based on the client’s representation.
Online
For online businesses, it is easiest to build bridges. We can use tracking systems like Campaign Manager (CM360) to see how people navigate through channels and what it leads to. It’s simple because the business goals are usually digitized as well.
Here, we can track the response to advertising, work with CPC (Cost Per Click), measure CR (Conversion Rate), and have results.
Online+Offline
If a business combines online and offline components, analyzing the effectiveness of advertising becomes more complex because customers can go to an offline store instead of completing a transaction on the website, thus falling out of the tracking systems’ scope.
This not only affects advertising but also the entire business analytics, so companies try to address this situation. For example, they implement the ROPO analysis model.
ROPO (Research Online, Purchase Offline) is a way of analyzing consumer behavior in which a company assigns its own identifiers to consumers and uses them to link all interactions between individuals and the company. This includes not only visits to physical stores and websites but also contacts with advertising if the processes are properly set up.
Often, loyalty programs serve as the basis for ROPO. Customers receive discounts or bonuses, and businesses have the opportunity to analyze their behavior. For example, pizzerias can link a person’s orders on the website through the shopping cart and orders made through a phone call to the operator using their mobile phone number.
Unfortunately, not all clients use such a system to identify the audience of digital ads. Therefore, as an agency, we supplement online business metrics with broader indicators such as audience reach.
Offline
Tracking the effectiveness of advertising is most challenging for offline businesses, but we already have relevant experience. In particular, we have worked with FMCG brands that do not sell their products directly but distribute them through various retail networks. In this case, we have several ways to measure the effectiveness of advertising.
The first approach is to track basic metrics of media advertising, such as reach, frequency coverage, brand search dynamics, etc., and estimate their impact on higher-level indicators based on these metrics.
The second approach is to connect the digital campaign to digital activities and refine the basic calculations based on this data. For example, when promoting alcohol brands, we gather data on sales in online retail. Currently, we can track online sales for up to 10% of the products, but even these percentages show trends that are useful for further calculations.
Another example is cars. People do not buy cars by clicking on a website; they visit a showroom. We work on campaigns for an official BMW dealer in Ukraine and measure the success of advertising campaigns through website conversions.
Most people who will buy a car in the showroom will first visit the website: they will look at the price, schedule a test drive, find a phone number, and read something.
These micro-conversions do not directly indicate a purchase, but increasing their quantity, traffic to the website, especially branded traffic, all contribute to the connection between our campaign efforts and the client’s business goals.
BMW, with its CRM, can track the customer’s communication with the manager, and our task is to show where this customer came from before reaching the manager.
We build more complex tracking systems and enrich the client’s CRM with data. We can demonstrate the customer’s journey that enters the CRM, but the decision to use this data depends not only on us but also on the client’s readiness.
Conclusions
- The metrics of each individual advertising campaign should be aligned with the business goals and formulated accordingly.
- Business metrics do not directly translate into goals in the advertising account. The business tasks should be decomposed into specific marketing goals, to which individual campaign tasks are then tied. The business sets the direction, marketing chooses the path, and the advertising campaigns follow that path.
- The process of aligning the metrics of an advertising campaign may take some time, as it involves considering the interests of all involved stakeholders and the available technological capabilities. The metrics, along with the KPIs they are tied to, must be agreed upon BEFORE the campaign starts, and there is no other way around it.
- Within the advertising campaign itself, there may be intermediate metrics for different levels of the target audience. At newage, we define separate KPIs for cold, neutral, and hot audiences, ensuring that they all contribute to the overall goal set by the client.
- Analytics is the cornerstone of marketing and advertising. It allows us to connect specific tactical actions with results at higher levels of the business. This connection enables us to objectively assess the impact and make informed decisions about further actions.
- Analyzing advertising campaigns for brands with offline presence is more complex than tracking the customer’s end-to-end journey in the digital realm. However, there are solutions that combine online advertising with offline store sales, so the complexity of analytics should not deter you from promoting your brand online. After all, calculating the effectiveness of offline advertising for offline products is even more challenging.