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What does CPC, CTR, CPM, CPL, ROI mean? Basic online marketing dictionary

What does CPC, CTR, CPM, CPL, ROI mean? Basic online marketing dictionary

CPC, CTR, CPM, CPL, ROI… do you go crazy when starting an online marketing campaign and the terms sound like Chinese? In this post, we explain in a simple way the meaning of these terms.

The digital marketing in its various aspects – content, email marketing, mobile marketing, marketing influencers, etc- offers multiple options for businesses to promote and disseminate the value of their products and services to your potential customer segment. If we talk about paid online advertising through famous platforms such as Google Adwords or Facebook Ads, you must have an “elementary dictionary” of the most used words at hand when planning your campaigns

Do not worry! In the beginning, it is very difficult to understand and select all the metrics that these platforms provide us, with which data and statistics analytics will soon become your biggest ally to understand the behavior of your users, detect failures, implement improvements and optimize your website or e-commerce to achieve better performance of it.

Here is a simple definition of some of the most popular terms linked to online advertising. 

Elementary online marketing dictionary: CPC, CTR, CPM, CPL, ROI…

Before starting with each of the terms it is important that you know the three basic metrics in any online advertising campaign:

  • Clicks: As the name implies, this metric refers to each occasion in which an Internet user clicks on an advertisement or advertising link.
  • Impressions: This metric is recorded every time a user is shown one of your ads. The number of impressions equals the number of times users saw your ad.
  • Conversions: These are the actions within a website that constitute an important indicator for the advertiser. Or in other words, the conversion is about the moment in which the user “clicks” and executes the key action marked within the marketing strategy that contributes to achieving the objectives set. It can be from filling out a form, downloading a file, generating a sale, registering in a newsletter, consuming a certain content, becoming a follower … In this article, we give you keys to improve them.

Basic terms of digital marketing

Now, these are some of the fundamental terms you should know to master the interpretation of the analytics of your digital marketing campaigns.

CTR

Acronym for Click-Through Rate conversion rate or click-through rate is an advertising efficiency ratio that measures as a percentage the number of times a user clicks on an advertising banner or online ad with respect to the number of times that ad appears on the printed screen -number of prints-.

CPC

It’s very simple and the most popular payment system: it means “cost per click,” or the way in which platforms like Google AdWords charge their advertisers. That is, every time a user clicks on an ad the online advertising platform charges a certain amount. The CPC can be obtained with the following formula: CPC = Total cost / Number of clicks. The advertiser pays for each click made on the ad: the basic principle of this metric dictates that if there is no click there is no payment.

Logically, the more clicks, the more money the webmaster or platform will charge and the more visits the advertiser will receive, so it is essential that the ads – whether in the form of a link or a banner – are colorful and attractive to arouse the desire to click of the users. 

It is one of the most interesting indicators since it allows you to assess the outcome of a campaign in relation to the number of users who have seen the ad and those who have clicked on it, so it greatly contributes to knowing the word performance key and ads.

Among the ad providers that charge through CPC, the three largest online ad platforms are Google AdWords, Microsoft Adcenter, and Yahoo! Search Marketing (Yahoo!)

CPI

This term constitutes the cost per interaction, a kind of mediation bid that advertisers pay exclusively when users interact with an ad without it being a click – since we would not be talking about CPC. An interaction is considered when, for example, the user places the cursor over the ad for two seconds.

In addition, the cost per impression is a way of measuring the cost and impact of a promotion, mainly in print media and on television. The way to calculate it is by dividing the total cost in media by the number of users who have viewed the ad.

CPM

It is a model quite different from the previous one. Its acronym is equivalent to Cost per Thousand Impressions, or the value it costs the advertiser to have his ad seen a thousand times. Therefore, this system is based on paying a certain amount of money for every thousand impressions – views – that an advertisement receives.

For you to understand, if for example, you hire a $ 6 CPM and you have 2000 impressions, you will pay $ 12. It is common for the cost per impression to be used to increase knowledge about the brand and its reputation – as a branding action – since many users will see the banner, but all will access the web as the CPC happens. An example of CPM advertising service is AdBooth.

It is calculated as follows: Total cost / (Number of impressions / 1,000).

CPL and CPA

In these types of advertising contracts, the price is linked to the loyalty of potential customers, since the advertiser pays for each new entry in the company’s database.

The acronym of the CPL refers to the term Cost per lead. It is the cost per activity or action. That is, the user will not only have to perform the action of clicking on the ad but must also carry out a specific action, from completing a form to making an order or paying online for a product, registering, subscribing to a newsletter, etc … It is the system used by most online stores and e-commerce. It depends largely on the ability of the advertiser to attract himself and the reach to his target,

In this price model the conversion of a user into lead is valued, that is, in a person who has given us more information, the previous step to becoming a customer.

CPA refers to the Cost per Acquisition, which bases the price on the results obtained: that is, the advertiser pays a fee based on the number of visitors to its website through online advertising and who perform a specific action, be it a record or request for information (CPL), a purchase (CPA), a cost per click (CPC) or any other previously agreed action.

ROI

They are the acronym of Return on Investment. This return on investment is the economic value generated as a result of carrying out various marketing activities. In this way, it is possible to know the degree of return obtained from an investment. Thanks to ROI you can evaluate how much has generated in sales each euro invested in an advertising campaign. 

The formula for calculating ROI is the following ROI = (BENEFIT – INVESTMENT) / INVESTMENT. It is the relationship between the investment made and the benefits generated, whether direct sales, conversions or obtaining potential customers.

To show it with an example, if you invest $ 500 in resources, take an online course through which you get, after completing, $ 1,500 of benefits, the return on investment will be 2%. Or what is the same, for every euro invested in the course, the return on investment is 2 euros. When the ROI is positive, the project is profitable. 

Written by Editorial Staff

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