Posted by: David Dittman
September 8, 2007
Issue #225

How to Track an Ad Campaign

Hello again and welcome to another installment of Working IT Out! The good news is that Microsoft didn’t shut us down after my last anti-Outlook article. That article had some great response and I’m encouraged to hear that there are so many out there who share my frustrations.

Well, here at The Total Package, it’s been a great two weeks of power-packed issues. I’ve been inspired by all the issues explaining the importance of tracking and how to actually use the information when dissecting the effectiveness of your marketing plan or individual ad campaigns.

In keeping with this mindset, I would like to take some time today and discuss the nuts and bolts of how to track a campaign. By now you should be sold on tracking and how it is essential for any real marketing endeavor, but “how to track?” is another issue entirely.

In this issue:

• How to track a basic lead generation campaign …
• How to project a 60-day lead value for your prospects …
• An example spreadsheet to use for your tracking …
• And much more!

What Should I Track?

So when it comes down to tracking, the
obvious first question is, “What should I track?”

Well, you can make this as complicated
or as simple as you like and, of course, this will depend on your goals as
a marketer or business owner.

If your goal is lead generation then your biggest concern is going to be your lead cost.

Lead cost is determined simply by taking the cost of the campaign and dividing it by the number of leads.

So if you spend $200 and you get 25 new leads your cost per lead is $8.00.

Now in order for this number to be useful to you, you need to know just how much a lead is worth to you. When you hear people talking about the lifetime customer value, this is the number they are referring to.

Clayton goes into a great explanation of lifetime customer value in his issue, Direct Response ‘Rithmatic: The Third "R".

I’ll put in a disclaimer here … There are a lot of different considerations to take into account. For some businesses, PPC leads cost a lot more money than co-registration leads – this is a whole article in itself. The point is your customer value can be broken down several different ways and should always be refined once you have actual hard data.

But … If you don’t already have a calculation for your lead value, you can use this simple calculation for a rough ball park figure.

Now we are going to get a rough estimate of our 60-day lead value. Take your net sales in the last 60 days and divide it by your total subscribers from the last 60 days. So if you brought in $3000 in net sales and you have 250 subscribers then your average lead value is $12.

It’s important to note that the lead value and customer value are not the same. Taking our above example, if you only have 10 clients out of your 250 subscribers, then your customer value is much higher, $300 per customer.

So in reality only 4% of your file is active and purchasing your products. These kind of statistics are important and extremely relevant when planning your overall marketing strategy, but for purposes of this article we’re going to keep it simple and just use our lead value.

It’s also important to note that the lifetime of a customer or subscriber can change from business to business, we use 60 days for many of our calculations but, if your average lifespan of a customer or subscriber is less than 60 days, you should adjust accordingly.

Now, that we are armed with our knowledge of what a lead is worth to us … You should be able to see the necessity of calculating how much a lead costs you in a particular campaign.

Obviously, you want to be able to pull the plug on a campaign or at least refine it if you are spending more money on a lead than a lead is worth to you.

So let’s breakdown exactly what we will be tracking for our typical campaign:

1. Cost of Media Buy: This will be the total cost of the media you are buying to facilitate your campaign. For PPC, this is the total amount you owe Google at the end of the day.
2. Clicks Received: This is the total number clicks from your media. Your goal here is to collect only unique clicks. Most click trackers will report the number of unique clicks but also the total number of clicks. So if you and I both click the media once that will be two unique clicks but, if I go back and click on the ad 6 more times, then the total number of clicks would be 8 but, we only care about the two unique clicks, representing the two unique potential clients.
3. Cost Per Click: This is a simple calculation of Cost of Media Buy divided by Clicks Received.
4. Number of Sales: This is exactly what you suspect, the number of sales you had.
5. Net Revenue: This is calculated by taking out all the production and fulfillment costs associated with your sales but, NOT your Cost of Media Buy.
6. ROI: Now you will now divide by your Cost of Media Buy by your Net Revenue.
7. Leads: The total number of new subscribers.
8. Lead Cost: Now you take your Cost of Media Buy subtract out your net profits and divide it by your number of leads.

How do I Track it?

Now here is the fun part … We know what to track but we have to make sure that we have all the correct tracking in place in order to accurately obtain these numbers.

Many of you will have access to linking tracking of some sort, but for those of you who don’t, you can use hypertracker.com or Google Analytics, both of which can be used for free, although to use some additional features of hypertracker.com there is a monthly fee.

Hypertracker.com has two versions:

1. The free version that gives you the number of clicks and allows you to supply the Cost of the Campaign to then calculate the cost per clicks for you. It also has some split testing capabilities.
2. The professional version expands the functionality of the free version and allows you to track sales, also computing an ROI for you.

I’m a big fan of hypertracker.com because it’s very easy to setup the basic version and a relatively painless process for setting up the e-commerce tracking portion, although some html coding skills will be needed for effective sales tracking.

Goggle Analytics is also a great tracking system, but
sifting through the information is a bit more of a project than it is with
hypertracker.com, and I’m not sure of the split-testing capabilities
of analytics – I
have yet to find them.

So when it comes down to recording the tracking for your campaign, you will need 2 basic pieces:

1. A spreadsheet to record the data.
2. An ad tracker to track the data.

The Spreadsheet

So let’s breakdown each cell and discuss what goes where.

Cell A3 is where you would name the campaign that you are tracking. For simplicity you should use a consistent name for both your spreadsheet and your ad tracker. This is a good time for you to introduce standard codes for your naming conventions. Such as PPCCBC, where the first three letter represent the type of media and second three letters represent the product. In this case, PPCCBC stands for Google PPC Campaign promoting the product Copywriters Business Course

Cell B3 is the date of the campaign.

Cell C3 is the total cost of the campaign. So if you did a media buy that costs you $5000.00 that is the price you enter here. You can also enter this number into hypertracker.com to take advantage of their tracking system. For PPC it’s slightly more complicated because every click adds to your total media cost, so you have to be sure that you record the data after the final click has been logged for maximum accuracy.

Cell D3 is the total numbers of clicks during the date range. This number will be collected from your hypertracker.com ad tracker.

Cell E3 is a formula to calculate your cost per click. You will divide your Media Cost by the number of clicks to determine this value.

Cell F3 is the total number of sales in the given date range. You can get this number from your hypertracker.com ad tracker link.

Cell G3 is the price for a single unit. So if you are selling an e-book for $29.00 each, you will simply enter in $29.00 in this cell.

Cell H3 is a calculation for Gross Revenue which simply takes your number of sales multiplied by the price of each unit.

Cell I3 is your cost for each unit sold; this would include all fulfillment and production costs associated with it.

Cell J3 is the Total Production Cost when you multiply your cost per unit by the number of units sold.

Cell K3 is your net revenue when you subtract your total production cost from your Gross Sales Revenue.

Cell L3 is your ROI or Return On Investment for your campaign. This is calculated simply by dividing your net revenue by your media cost.

Cell M3 will hold your total number of opt-ins or new leads. This may be a little harder to track depending on your signup box and subscription service but, in many cases you can add specific code supplied by hypertracker.com to alert them that you have successfully converted a potential subscriber into a lead.

This is done simply by placing the conversion code on the redirect thank you page that one gets when they opt-in using your signup box. If the goal of your campaign is straight sales then this number will simply be the number of sales you have.

Cell N3 holds your lead cost for the given date range of your campaign. This is by far the most important number for most marketers or business owners because this will be used to determine if the particular media campaign is worth continuing for lead generation.

For example, if your lead cost $7.00 but, your computed lead value is only $6.00 then you better stop that campaign because you are losing money, probably a lot of it!

On the flip side, if you find out that your ROI is poor but your lead costs are extremely low, that’s no problem since you know that the lead’s lifetime value is worth a lower immediate sale.

John went into detail on some of the specifics you need to keep in mind when thinking about a customer’s lifetime value last week. So, I won’t reinvent the wheel on that, but it is important to note that there are many considerations to take into account.

Cell O3 is a projected 60-Day Revenue based off your 60-day customer value. In this example, we chose a 60-day lead value of $6.00 per lead multiplied by the number of opt-ins or leads.

Cell P3 holds the 60-day Net profit from your campaign. This is simply your 60 day projected revenue plus the net revenue from the campaign minus the media cost. Now this is truly a telling number because it will add up both your potential sales and your existing sales to give you a realistic idea of how you will look in 60 days, provided your 60 day lead value is pretty close.

The real trick will be to revisit this campaign in 60 days and compare your estimated 60-day lead value to your actual 60-day lead value. Now when it comes time for a new campaign you can simply use the actual lead value as your new projected lead value.

Cell Q3 houses the 60-day projected ROI. This will be calculated much the same as your ROI was but now you will use the 60-day projected net revenue instead of the current net revenue.

So that’s the down and dirty on the stats you will need and how it fits into one readable spreadsheet.

Now let’s talk about how to get these values using hypertracker.com as our example.

The Ad Tracker

This part may seem complicated at first, but after you do it a few times, you’ll be fine.

For a basic campaign, you will have some type of media – PPC ad, banner ad, flash ad, e-mail ad – that a potential client will click on to get the full scoop on what you promise in your ad.

This is the point that you will want your hypertracker.com ad tracker URL in place of the regular URL that navigates you to the sales message.

Most of the pieces are self-explanatory, but you need to be sure of a few specific things.

Make sure when you name your campaign that you use the same name that you used for the campaign name of your spreadsheet. Once you get multiple ad trackers, a good naming scheme is essential for keeping you sane.

Once you have saved you ad tracker, a unique URL will be created that will be used for tracking in whatever media you are using to drive your specific campaign.

Remember that each piece of your campaign plays a different role in the overall tracking of your campaign and there are multiple ways to get the various statistics one needs to populate the spreadsheet above.

For example, many of you will be able to track sales through your shopping cart so you won’t need to use another means of tracking them, but if you can’t get that info for some reason, here is another way to do it.

You put a separate ad tracker, named appropriately, on the order form that only gets submitted after a successful sale. So now if you check the clicks of this ad tracker, what you’re actually seeing are successful sales transactions.

You’ll find yourself in the same predicament when it comes to tracking leads. An easy way to accomplish this goal is use a third ad tracker that is installed on the redirect page of your opt-in form. Once again, when you check the clicks on this ad tracker the clicks will really represent people who opted-in or leads.

I’ve put together this graph to help keep it all straight.

Now that you have your three ad trackers in place or a different system to track clicks, sales and leads, you simply go through your ad trackers and plug the numbers in your tracking spreadsheet above.

Well, that about wraps it up for the “how to” portion of tracking. You’ll find that many of the specifics such as what service you use for tracking links vary quite a bit. In the end they all track clicks, it’s up to you to make sure that you place the ad trackers in such a way that you are successfully tracking the correct pieces.

Before I sign off though, I’d like to give you a copy of the spreadsheet I used above. It’s an Excel spreadsheet, so if you’re not a fan of old Bill Gates, you’ll need a copy of Open Office to open the file.

Until next, time have a great time and keep your comments and e-mail questions coming in and I’ll be glad to clear up any cloudiness that I can.

Thanks and have a great weekend!

Editor, Working IT Out
THE TOTAL PACKAGE

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3 Comments »

1. Comment by Mark Brown — September 8, 2007 @ 9:52 am

   Hi David,

   I really like your article until you started talking about Google and Hypertracker.

   Could I get you to do this same article with an overview of my new service ProTrackerPlus.com?

   All the best,

   Mark

2. Comment by Hendry Lee — September 8, 2007 @ 10:28 am

   David,

   What is the correct formula for Lead cost?

   Lead cost = Media cost / Total leads

   or

   Lead cost = (Media cost - Net Revenue)/ Total leads?

   In the text, you explained with the former formula, but in the spreadsheet, you use the latter.

3. Comment by David Dittman — September 8, 2007 @ 4:06 pm

   Oops!

   I have fixed it in the copy above but, the correct formula for lead cost calculation was the formula I showed in the spreadsheet, the second formula Hendry showed above, Lead cost = (Media Cost - Net Revenue)/ Total Leads.

   The idea is that if you take your media costs and then subtract whatever immediate net income came in from the campaign that will give you a true representation of what the campaign cost you in that date range, then you take that number and divide it by the number of leads that the campaign generated to compute how much each lead cost you.

   If you actually made money on the campaign then the leads didn’t cost you a dime.

   Sorry, for the inconsistency and I hope this clears it up.

   Thanks for your comment,
   David Dittman