Assignment 1 | Term 2: CTR

Term 2: (CTR) Click-through-Rate

Category – Visit Characterization

Click-through-rate, or CTR, is an important metric for search engine marketing and digital advertising. CTR is a metric defined as the “number of click-throughs for a specific link divided by the number of times that link was viewed.” (Reed College of Media, 2018) The metric allows for an apples-to-apples comparison on the performance of an advertisement or keyword within a search engine marketing campaign. For example, you can compare the CTR of one keyword advertised across multiple search engines to determine which provider performs the best.

            There are many practical business applications for making CTR a primary key performance indicator of a digital advertising campaign. If your intended goal, for example, was to increase applications for vehicle loan refinances, and you wanted to run a display and SEM campaign, at what point in the purchasing decision would you have the best response for your ads? This is a practical problem in the financial services industry, where one might be tempted to run advertising late in the purchasing decision cycle, or early, to raise attention to the product. Also, how would one benchmark those results within the industry to make sure they either performing at, or above, where other similar businesses are.

            In looking at the auto refinance example, we can find a benchmark with some industry research. Alexander Clark of Smart Insights notes that the financial services industry sees an average CTR of 2.65% on SEM and 0.33% CTR on display. (Clark, 2016) The CTR for search is the second highest ratio compared across multiple industries.

(Clark, 2016)

            The distinction is important, as a benchmark CTR must be applicable for the industry and not generic. Giving a brief example, the vendor I used for our SEM campaign at a previous employer constantly touted that our CTR of around 3% was far performing his other clients. While this number was impressive compared to his other clients, which were not financial institutions, it appears to be less impressive when compared to the industry average.

            In revisiting the Auto Refinance Campaign example, CTR can be used at an early buying stage to prospect potential customers who may not be considering, or aware of, the option to refinance their current car loan. This would include buying keywords that target people who are searching for the login address for their current car loan holders, which are typically car manufacturer captive financing – Ford Motor Credit, Hyundai Capital, etc. The messaging would include copy such as “you can refinance your car loan with no fees!” or “reduce your monthly payment on your current car loan.”

            At the opposite end of the campaign, the targeting would include search terms for the specific intended action. In this case, people searching for “best car loan refinance rates” or something similar. These keywords are highly competitive and costly, but they could yield a customer who is more likely to complete the loan application. At my previous financial institution, we completed a campaign that measured both of these results with the primary KPI being CTR. We found that marketing to those at the end of the purchasing decision cycle yielded a better CTR and conversions for the campaign.

            While there are many important metrics within digital marketing, click-through-rate ranks as one of the highest. It provides for practical, and easy to understand analysis when comparing the success of campaigns.

References

Reed College of Media. (2018). Week 1 Lesson: Intro to Web Analytics and the Basics of Web

Analytics. Retrieved January 16, 2018.

Clark, A. (May 18, 2016). The average click through rate (CTR) for 20 key Industries. Smart

Insights. Retrieved from https://www.smartinsights.com/paid-search-marketing-ppc/average-click-rate-ctr-20-key-industries-chartoftheday/