|
Within the language of analytics, there are several essential acronyms you need to under-stand in order to analyze the data in Google Analytics. Among the long list of acronyms in Google Analytics there are three that stand out among the rest because they are directly tied to results (mainly e-commerce results). Those three metrics are: conversion rate (CR), cost per action (CPA) and return on investment (ROI). Conversion Rates (CR) In the world of online marketing, a conversion rate is the ratio of visitors who "convert" a visit into a desired action such as email opt-ins, product sales, white paper downloads, and subscription signups. The calculation is simply the number of conversions divided by the number of visits or clicks if you are measuring pay per click performance. For example, if you had 100 visitors to your website on a given day and five of those visitors subscribed to your e-newsletter, then your conversion rate would be five percent. Cost per Action (CPA) A cost per action, also known as cost per order, cost per lead, or cost per conversion, is the advertising cost you pay for one completed action/order/lead/conversion. CPA is calculated by dividing the total advertising cost by total completed actions. For example, if last month you spent $1,000 on advertising to generate 2,000 visitors and 20 of them subscribed to your newsletter, your cost per action for a newsletter subscription is $50, or $1000 divided by 20. Ideally, you want the lowest cost per action possible. In other words, the less amount of money you pay for a lead or conversion, the better. Of course, you may not mind paying a higher CPA, depending on the number of purchases a visitor made over time and their lifetime value. But in most cases, a low CPA is desired. Return on Investment (ROI) Return on investment is the most common profitability ratio for an online business. ROI is simply a comparison of how much you spent versus how much you made. Measuring ROI for online campaigns is a huge advantage over offline advertising, such as newspapers, magazines, radio or television, where this level of ROI is difficult to measure. To calculate ROI, subtract the ad cost from the revenue generated. For example, if you spent $500 on an advertising campaign and sold $1,500 worth of product as a result, then the ad profit is $1,000. Then divide the ad profit by the ad cost. In this case, your ad profit is $1,000 and your ad cost is $500, so your ROI would be 100 percent. CR, CPA, and ROI have a purpose and cannot be understated. They help you pinpoint the success of each marketing initiative and how much of your budget is allocated to each. What's great is that Google Analytics automatically measures the goal conversion rate and return on investment for you so you don't have to worry about the calculations. © 2012 Rob Sanders. This excerpt by Rob Sanders, courtesy of Editor Laura Lowell, is Rule 7 from "42 Rules for Applying Google Analytics". As founder of RSO Consulting, Rob Sanders brings a wealth of knowledge and experience to the world of online marketing. RSO Consulting's core competencies include search engine marketing (pay per click management and search engine optimization), social media optimization, and web analytics consulting. Rob started his online career as a Web Producer for USA Today Online in 1994 before moving to Philadelphia to help launch an online media service at The Sports Network. You can purchase the book at http://42rules.com/book/42-rules-for-applying-google-analytics/. Follow 42Rules at https://twitter.com/#!/42_Rules.
Related Articles -
Google Analytics, website stats, website statistics,
|
