Instead of looking to hit some standard or benchmark, we need to optimize towards hitting a viable ROI goal.
Every once in a while I get questions from clients and potential clients about benchmarks and standards for things that typically have so many variables that it's nearly impossible to answer with any degree of accuracy. For example, I get a lot of questions like, "What is a standard click rate or conversion rate for a campaign?"
The reality is that even with industry categories, click rates and conversion rates are all over the place and they are typically more influenced by product appeal, brand recognition, creative, and offers than your actual media selections. I'm not saying media doesn't have an impact on campaign performance, but the media puts you in front of the right people and the creative generates the action.
Sure, we all know a good click rate and conversion rate when we're looking at it. Click rates for banners over 0.2 percent are typically considered good and a 5 percent conversion rate is definitely considered healthy – but again, that doesn't make it viable or profitable for your client. So hitting an industry standard or benchmark doesn't mean you are successful. A low click rate or conversion rate may be viable for a high cost product and a high click rate and even conversion rate still may not cut it for an inexpensive or low value item.
Think ROI Goals, Not Standards and Industry Benchmarks
So of course I can always try and quote industry benchmarks for various studies that pop up here and there and even tell my clients what I think a good click rate is for their category. But rather than doing that, what I try and do is model click rates and conversion rates to show them what we must strive for to create a viable cost per action, lead, or sale. So instead of looking to hit some standard or benchmark, we look to optimize towards hitting a viable ROI goal.
This means that inexpensive placements with low click and conversion rates may stay in the mix if they deliver a viable ROI. And conversely, expensive placements with better KPIs (key performance indicators) on the click and conversion front may not result in a viable ROI.
Looking at a campaign's ROI goals also lays out a more rational approach to opening a viable online media channel. It allows media managers and clients to do two important things:
So next time you get a question like, "What is an industry standard click rate or conversion rate?" try asking, "Well, what kind of metrics will actually produce a viable result?" and let's set our metrics and optimization efforts around those metrics.
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As founder and CEO of Overdrive, Harry Gold is the architect and conductor behind the company's ROI-driven programs. His primary mission is to create innovative marketing programs based on real-world success and to ensure the marketing and technology practices that drive those successes are continually institutionalized into the culture and methods of the agency. What excites him is the knowledge that Overdrive's collaborative environment has created a company of online media, SEM, and online behavioral experts who drive success for the clients and companies they serve. Overdrive serves a diverse base of B2B and B2C clients that demand a high level of accountability and ROI from their online programs and campaigns.
Harry started his career in 1995 when he founded online marketing firm Interactive Promotions, serving such clients as Microsoft, "The Financial Times," the Hard Rock Cafe, and the City of Boston. Since then, he has been at the forefront of online branding and channel creation, developing successful Web and search engine-based marketing programs for various agencies and Fortune 500 companies.
Harry is a frequent lecturer on SEM and online media for The New England Direct Marketing Association; Ad Club; the University of Massachusetts, Boston; Harvard University; and Boston University.
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