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What do the abbreviations CPM, CPC, CTR and CPA mean?
We have summarized all these terms and many more in our digital marketing dictionary. Download it here for free.
Online advertising is becoming increasingly popular. But how efficient is it really? Contrary to the widespread opinion that advertising measures are difficult to measure, there are very precise instruments that make it possible to understand the advertising success of online advertising. A good communications agency is usually very familiar with these tools. For example, Google Adwords or Facebook Ads can be easily measured. Here's what you should know about it:
CPM (Cost per Mille) - Thousands of contact price
A very general quantity is the thousand contact price. It provides information about how high the costs are to achieve a thousand impressions from users on the Internet.
- CPM = cost of 1000 impressions of an online advertisement
CPC (Cost per Click) - Cost per click
Cost per click is probably the most common metric. It means that with every click on an advertisement costs arise for the advertiser.
The level of the key figure is defined on the basis of a search term (keyword) and its success rate. For example, popular search terms such as "life insurance" will generate a higher cost per click than "possum".
- CPC = cost to the advertiser when someone clicks on the online ad
CTR (Click through Rate) – click through rate
CTR measures the effectiveness of an online ad. An ad that is shown more often and is relevant to the consumer is also more likely to be clicked. The click rate is the ratio of the number of actual clicks to the total number of impressions. The higher it is, the better.
- CTR = Percentage of clicks to the total number of impressions
CPA (Cost per Action) – Cost per action
The CPA also states costs. However, it differs from the CPM and the CPC in that it indicates the effective effectiveness of a measure. An "action" is defined at the beginning of a campaign and describes an intended action that you would like a user to take: for example, entering an email address, purchasing a product or printing out a voucher.
- CPA = Cost of a user's intended action
The CPA should never be higher than the margin on a specific product. For example, if your margin on a camera is CHF 50, the CPA should not exceed CHF 50. If the CPA is higher, you lose money on every purchase. In order for the CPA to be optimized, you must have your Google Adwords campaign well organized and systematically evaluate your data. You must clearly define and know your goals from the start.
The following video shows the effectiveness of Google Adwords and how success can be measured with sophisticated instruments.
Facebook Ads are more challenging to manage. They require computerized platforms such as Alchemy Social's license-based solution. Enigma has a license for it and is happy to support you in it.
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