Okay QUICK, tell me—what’s the main goal of your ad campaigns? Well, you obviously read the title before clicking through, so you know I wouldn’t gear towards high CTR being the primary goal. It’s especially not ideal for larger brands, such as major DTC’s.
But if not high CTR, then what should the primary goal be? Attracting the most valuable users! Before I get into that, let me provide some context.
High CTR is good, but not necessarily good enough
Offhand, high CTR rates appear impressive. They validate the creative elements of the ad campaigns. Good job—your headline was provocative. Awesome—the visuals were compelling. That’s great news for the creative teams, but not necessarily the cause for early celebration for growth teams.
After all, what use are those clicks if they’re from less optimal users that don’t (or won’t) lead to conversions? Also, if they end up bouncing off the site/landing page… it’s back to square one. That puts growth teams in the position to evaluate the CTR in synergy with the conversion rate, because CTR’s don’t tell you exactly why the user clicked the ad, or what happened after they clicked. For instance, a high CTR with a low conversion rate can reflect a situation where users felt that the landing page content was different from what may have been promised to them in the original ad, so they’ll get discouraged and are more likely to leave the page. That high CTR may have initially sounded good, but the context was the element of misleading ad creatives.
CTR is an important metric for better understanding how people engage with your ad, but it can't stand alone. Marketers need to see the whole picture with a combination of different metrics beyond conversion rate, such as ad impression frequency, cost per conversions, and ROAS.
In the case of apps, particularly gaming apps—IPM (Installs per Mille impressions) is one of the most important metrics to use. All in all, the goals for growth campaigns should be more about quality than quantity, as you focus more on the long-term, instead of quick wins. And focusing on the long-term calls for LTV-optimized campaigns.
The unique role of CTR
User acquisition managers can use CTR to measure the value of ad creatives, and determine the best message to attract users to their website or application.
These days, CTR is playing an important role in terms of ad networks' ad quality metrics. For instance, in Google search, CTR serves an important role where your ads rank, which later helps improve your quality score (the measurement of advertiser's relevance as it relates to keywords, ad copy, and landing pages), and when your score is better it might decrease your CPC, and ultimately your CPAs.
The most sophisticated organizations additionally take advantage of the data that CTR provides. For example, A/B testing can be used by growth teams to test different ad creatives to bring significant results, which can then be passed onto sales and product teams. The sales and product teams can then use those insights to improve their messaging, and the user experience with the product.
When combined with other metrics, CTR can also help you understand if you are targeting the right audience; what your audience’s interest is; and the intent of your audience for your product or services.
To further illustrate my points, let’s say you ran two campaigns. The first one had a high CTR, but low conversion rate. Meanwhile, the second campaign had a low CTR but high conversion rate. So which campaign was the “better” one? It’s kind of like comparing apples to oranges, right?
In this case, it’s safe to say that the low CTR campaign can be considered as good as, or even better than the high CTR campaign. It might sound a little perplexing at first, but at the end of the day, you need to remember that CTR is a soft KPI, and ROI/ROAS is the main goal for lasting impact and greater profitability in the long-term.
Here are some additional metrics that are worth considering for your campaigns:
- CPA - the total cost of a customer completing a specific action
- ROAS/ROI - the return on ad spend/ investment
- Customer Lifetime Value (LTV) - this metric indicates the total revenue that your business can reasonably expect from each individual customer account. LTV considers a customer's revenue value, and compares that number to the predicted customer lifespan
Optimizing campaigns for LTV unearths new possibilities for marketing teams, serving as a gift that keeps on giving in the long term thanks to the many perks it presents.
How to optimize campaigns using LTV data
There are numerous ways in which your team can use LTV data to squeeze the most out of your campaigns. For instance, you can use it to target your next best users, based on the historical data of your current most profitable users. This approach instantly creates diversification opportunities, and increases scalability. You can also use this data to optimize the impact of your retention campaigns, by taking on initiatives such as interacting with users after promotional periods have passed.
Predictive acquisition solutions can make all this feasible for growth teams, and even go a step further by unlocking new opportunities that ad networks currently do not deliver by default. This includes signaling ad networks of users who are expected to have high lifetime value over time, to target them accordingly. This post delves into the technical details of that approach.
The goal? Attract the most valuable users for your brand!
I have no doubt that you value any and all users, but at the end of the day, the most valuable ones are the top 20 percent that have proven to be most valuable over time, and future users with similar attributes.
The most efficient way to attract the most valuable users is by utilizing an LTV-predictive model to identify them, go to the ad networks that your best users came from, and launch optimized campaigns on those channels. The end result? Greater scalability and sustainable profitability!
So at the end of the day, optimizing for high CTR is fine, but is like playing checkers. On the flip side, optimizing for high LTV to attract the most valuable users is far more beneficial, and is like playing chess!