A performance goal is a target that has a measurable numeric value. Performance goals and their associated metrics define success. Without them, it’s simply a feeling or guesswork on how a campaign is benefiting a business.
Set performance goals
Suppose a business goal for an e-commerce store is to improve customer acquisition by 20% over the next three months. Customer acquisition is a marketing term for the process of gaining new customers.
Customer acquisition for an E-commerce store depends on traffic to the site. The more traffic coming to the site, the greater the chance of acquiring new customers. A campaign is planned to help generate more traffic to the site to improve customer acquisition. For example, you set an initial performance goal of a 20% increase in weekly new visitor counts to match the desired business goal.
To determine whether you’re meeting your performance goal, you monitor the metrics for new visitors to the site and compare them to the previous baseline numbers. Once you reach a 20% increase, you’ve met your performance goal.
But, it may take more than one performance target to satisfy a business goal. What if new visitors come to the site but leave without taking action? That’s called a bounce.
If you increase your new visitor count but have a high bounce rate, you might not reach the business goal of improving customer acquisition by 20%.
Try setting a second performance goal to reduce the bounce rate by 50%. Then, monitor the performance metrics for new visitor counts and bounce rates. You can observe that weekly increases in new visitor counts aren’t offset by a bounce rate that is too high, and the number of returning visitors is holding steady, or increasing along with an increase in the number of new visitors.
In the second example, a business goal is set to achieve $50,000 in incremental sales over the next month. A marketing goal follows to increase the marketing return on investment, or ROI, by two times its current value. To determine a performance goal an additional budget at a campaign level, perform a couple of calculations.
First, determine how many more orders need to be placed to generate an additional $50,000 in incremental sales. For this calculation, you can use the average order value or AOV.
Let’s assume the AOV is $148. Divide the target incremental sales of 50,000 by the average order value of 148 to get the number of additional orders or 338. So the performance goal is an additional 338 orders.
Next, if the current marketing ROI is two and the marketing goal is to double it, you can assume a 4 to 1 ROAS to be aligned. You can then calculate the incremental budget you need by dividing the incremental sales amount by the return on ad spend. Divide the incremental sales amount of 50,000, by the target ROAS 4. You will need to request $12,500 of additional campaign budget to drive additional sales.
The third example, the marketing goal is to increase the conversion volume from social media by 25% over the next six months. Conversion volume is the total number of conversions or total monetary value of conversions over some time. A conversion happens when a potential customer takes the desired action. If you’re measuring conversion volume by the total number of conversions, you can set a performance goal for an individual channel.
For example, over the next six months, you could try to increase by 10% the number of conversions and sessions referred from Instagram. If you’re measuring conversion volume as a monetary value, you’ll need to assign monetary values to different types of conversions, such as leads or purchases. This can normally be set up and monitored in tools like Google Ads.
A performance goal in this case would be a certain monetary amount by the end of six month period. For example, $100,000 is attributed to conversions and sessions referred from Instagram.
That’s how you create performance goals from business and marketing goals.
Costs-related performance goals
There are many other kinds of cost-related performance goals to consider.
Lower Cost per acquisition (CPA) to improve campaign value
Note: Performance goals will vary by campaign. Cost-related information provided below is for illustrative purpose only.
If you have comparative data from historical campaigns, you can use the average CPA value as a performance goal. You can then optimize your campaign to try to achieve a lower CPA to improve the value of your campaign.
If you don’t have historical campaign data, you can try using an industry-average value as a starting point. Industry averages are typical values found across an entire industry. CPA for search ads for the auto industry, CPA for Facebook ads for the clothing industry, and CPA for e-commerce are a few examples.
Imagine you’re working for a real estate firm but don’t have historical campaign data. You research and find that the industry-average CPA for real estate search ads is $41.14, so you set your target CPA at $40. Your budget for search ads is $10,000 so you’ll be aiming for at least 250 conversions to meet or exceed the target CPA of $40.
Number of conversions for improvement = Budget / CPA = $10,000 / $40 = 250
If a conversion is defined as a potential customer requesting information about realty services, you’ll need at least 250 people to take that action after seeing your search ads. If more than 250 people take that action, you will have improved your campaign’s value above the industry average for real estate.
Use daily spending to manage CPC
Note: Performance goals will vary by campaign. Cost-related information provided below is for illustrative purposes only.
One way you can control cost is to manage CPC on a per-campaign basis. You can allocate more budget to the PPC campaigns that are the highest priority.
If you’re running national search ads for multiple regions, but the northwest sales region has a higher priority than the southwest sales region, you can spend more of your budget on the PPC campaign for the northwest region. Assuming the maximum CPC is $0.50 for both regions, you can allocate a daily spend that’s higher in the northwest to achieve more clicks in that region. If you assume a daily spend of $200 for the northwest region and $100 for the southwest region, the following calculations apply:
Number of clicks in the northwest region = Daily Spend / CPC = $200/$0.50 = 400 clicks
Number of clicks in the southwest region = Daily Spend / CPC = $100/$0.50 = 200 clicks
Based on the difference in the daily spend, the number of clicks you are willing to pay for in the northwest region is greater than the number of clicks you are willing to pay for the southwest region. You can control the daily spending during the campaign to manage performance outcomes in each region.
Understanding CPA, ROAS, and CPC help you manage campaigns. Daily spending or CPC adjustments to maximize the number of conversions.
Happy learning and good luck!