Online advertising metrics are evolving as technology and analytics become more advanced. Not long ago, third-party ad serving transformed the exercise of determining which placements were delivering the most cost-effective clicks (measured as Cost per Click, or CPC), into optimized campaigns based on more meaningful Cost per Action (CPA) metrics, such as Cost per Sale and Cost per Acquisition. This evolution continues today as a new metric, Cost per Revenue (CPR), now gives advertisers an even greater level of insight when evaluating and optimizing their digital marketing programs.
Microsoft Advertising Institute has performed a study examining the correlation between Cost per Revenue and Cost per Sale, with the goal of understanding how CPR might change media optimization decisions. Microsoft Advertising Institute evaluated the campaign results of BestBuy.com, a leading electronics and entertainment retailer. Microsoft Vital Signs, a campaign and site analytics tool, was used to evaluate the results based on each metric.
The results showed that optimizing based on Cost per Revenue can produce better financial results than optimizing solely on Cost per Sale. Thirty percent of the sites that Best Buy decided to retain in the media plan based on Cost per Revenue would have been dropped had they optimized on Cost per Sale alone. Optimization resulted in a 36 percent decrease in Cost per Revenue across their media plan.
This study shows that advertisers focused on driving online transactions can make more informed and relevant optimization decisions by adding Cost per Revenue to the set of metrics they use to evaluate campaign performance. Cost per Revenue represents the next step in the evolution of digital marketing metrics and can help advertisers build campaigns that more accurately deliver on their business goals.
Microsoft Advertising Institute publishes Digital Marketing Insights (DMIs), a series of publications by digital marketing experts that help our customers improve their digital marketing effectiveness. Many of these findings are also made available to the digital marketing industry at large. Each DMI is designed to help marketers more successfully build value with their customers, throughout the customer lifecycle: from awareness to acquisition and from retention to growth. Microsoft Advertising Institute also provides education in digital marketing to Microsoft customers.
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