July 7, 2021

Conversions – How to Track Them & Measure ROI on Your Ad Spend

Not long ago, marketing and advertising were considered necessary endeavors that didn’t necessarily generate profits. Tracking marketing goals in relation to the sales cycle and, ultimately, the bottom line was fraught with challenges. 

Businesses have traditionally understood the need to establish a brand image that speaks to consumers about the products or services they offer and stay top of mind. But how exactly these necessities related to actual dollars and cents was a mystery. Questions like, “Did investing in this campaign lead to more sales?” or, “Does creative set A lead to more sales than creative set B?” were difficult to answer. Marketing professionals needed a way to tell if their campaigns were actually generating profits. 

Thankfully, digital advertising now gives businesses that ability. By tracking conversions, there’s a direct line of sight to the return on your investment.

 

What Are Conversions? 

As search engines and social media platforms monetized their products, the need to track and attribute success was as much a necessity for the advertising platforms as it was for the advertisers using them. The platforms, search engines and social media networks could present a strong case for using their product, and advertisers could see their ROI in real-time dollars. With conversions, marketing and advertising efforts can be linked to a financial gain or loss. So what exactly are conversions, and how do you track them?

In a sense, a conversion can be any online action of perceived value. It can be as abstract as how far a user scrolls down a page or as traditional as a form fill. A conversion can be anything trackable an advertiser deems valuable to their business or marketing campaign. It’s the desired result of a marketing/advertising message and can be a determining factor in a campaign’s success. In short, a conversion meets these criteria: 

  1. An action
  2. Trackable
  3. Of value

 

How Are Conversions Tracked?

Different platforms have different names for their conversion tracking programs. For example, Facebook has Facebook Pixel. Google has Google Tag Manager and the tags that you configure within it. However, every platform follows the same basic tracking system. The easiest way to think of this system is by asking “what” and “how.” What specific action is being measured? And how will that action be tracked as a conversion? 

The “what” of the system is usually the easiest to define and set up. Depending on the platform, we outline basic information about the conversion using the framework below. 

  • Source/Category
    • Where the conversion will be coming from or what specific action within the site we want to track 
      • Website, app, imports or a call
      • Lead, Purchase, Sign Up, Request Appt, etc.
  • Conversion Name
    • What you’d like your conversion to be called
      • For example, if the conversion will be a form fill for an insurance quote, then you’d name it “Insurance Quote Form Fill”
  • Value 
    • How much value this conversion is bringing to your business
    • Easier to determine if the conversion has a monetary value, like a product with a price
    • If the conversions don’t have a monetary value (like a form fill or call lead), you could assign values in a comparative sense
      • For example, a call conversion might be twice as valuable as a form fill, so you would assign the call conversion a value of 2 and the form fill a value of 1. 

 

The “how” part is a bit trickier. This trigger determines when a conversion is being recorded. Again, depending on the platform, the process can differ. During this step, though, we tell the conversion tracking system to look for specific triggers. The trigger can be a click, pageview, form submission or any predefined action that’s uniquely identifiable and defined by the execution of code on the site. The trigger is activated—and a conversion tracked—when conditions defined by the unique execution of code are met.

For the sake of simplicity, here’s an example of a conversion using Google Tag Manager’s setup. In this example, we want to track calls from a website’s homepage by clicking a phone number. We begin by defining the conversion as follows: 

  • Source: Call-from-Website
  • Conversion Name: Phone Call from Homepage
  • Value: $15 (our business values each call at $15 based on the fact that our cheapest service is $15)

 

Now, we define the “how.” By looking at the website’s backend, we can see the click-to-call phone number executes a script of code called a tel: link each time it’s clicked. So we tell this conversion action’s tag within Google Tag Manager to detect a conversion whenever someone—after arriving from an ad—initiates the tel: link with a click. 

The tag is ready to detect our conversion now that we’ve defined what we’re tracking and how we should be tracking it. If the conversion were a button, then we’d look for the specific element ID assigned to the button and the execution of that element whenever it’s clicked. Or, if we wanted to track purchases, we’d use the “thank you” page’s URL as the indicator of a successful conversion since the page’s source code, including its URL, is executed whenever a purchase is completed. The key is finding an execution of code that’s uniquely tied to what you want to track. 

 

The Importance of Conversions on Your Bottom Line

Conversions are the link between your campaigns and real-time dollars/value because they connect campaigns to desired results on your site or social media. This link becomes even more important when you’re able to assign dollar-specific values to each conversion action in the campaign. By comparing the aggregate value of all conversions to the ad spend, you’re can tell if the campaign was profitable.

Let’s say you only have one conversion you want to track at a value of $10, and your monthly ad spend is $200. You’d need at least 21 conversions to be in the green. In reality, there are other costs and fees to take into account, like management fees (if you’ve hired someone to oversee your campaigns) or cost of goods sold if you’re an e-commerce business. But, for the sake of simplicity in this example, conversions allow you to monitor financial metrics in relation to your campaigns. 

As your campaign progresses and is optimized, your focus will shift to smart bidding strategies centered on ad spend ROI or maximizing your conversion volume and value. And if they’re successful, you’ll have even greater influence when balancing marketing efforts with your bottom line. While higher sales is usually the most obvious method of improving your bottom line, keeping costs down may be just as important. Conversions can help you detect campaign inefficiencies that may contribute to increased costs, such as ineffective target parameters and misleading campaign metrics.

For example, a campaign could have a high click-through rate but a low conversion volume and rate, meaning you’re spending but not seeing a return on that spend. Without conversion tracking in place, detecting this budget waste would be difficult and might fool the advertiser into thinking the campaign is producing results based on user engagement. As you can see, conversions are essential to the entire online sales funnel and perhaps one of the most critical pieces when you launch a new digital ad campaign.

Not familiar with running digital ad campaigns? That’s quite all right. Campaignium’s Digital Advertising team can help you decide what type of campaign might benefit your business. Contact us today to continue the conversation about conversions!

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