What Is a Click-Through Rate, Why It Matters and How To Improve It – With Examples
What is a Click-Through rate and why are marketers so obsessed with it?
As marketers, we sometimes struggle to explain why metrics are important. If you search online, you will find huge debates around which metrics matter the most, which ones you should pay attention to, and which ones are obsolete.
Let me tell you right away: the metrics you track depend on your objectives and your approach to marketing. If you are new to all that metrics talk, check out our article about metrics.
What is a Click-Through Rate (CTR)?
Simply put, the Click-Through Rate or CTR is the number of people who clicked on your ad, divided by the number of impressions. It’s a percentage that indicates how enticing your ad is to potential customers.
CTR is a metric that is very important in paid advertising. Measuring metrics is a way to see if your efforts are working towards reaching your objectives. It might be that a high CTR doesn’t lead to conversions so it’s useful to use Google Analytics to have an overview of what is happening on your landing page.
Why CTR Matters?
After clarifying what is a click-through rate, we will explain why CTR matters, let’s look at different examples.
Let’s say you place an ad on Facebook. This ad is seen by 5000 people in total. 20% of those people click on your ad, which equals to a CTR of 20%. This means that 1000 users clicked on your ad and are directed to your landing page. The other 4000 who saw your ad but didn’t click on it are “lost” (you can still target those people later, but for the purpose of the example, let’s assume at this point that they are not interested enough to click on your ad).
Of those 1000 people who went to your website, 50 clients buy your product or service, with an average cost of $100. This equals a conversion rate of 5% and gets you $5000 in revenue (50*100 = 5000).
To get 5000 people to see your ad, you will have to invest an average amount into your digital advertising campaign. Let’s say you spent $1000 on your digital ad. If you subtract this from your overall revenue of $5000, you will still have a win of $4000. This is obviously a very simplistic calculation, but it’s only to showcase how you should look at digital advertising.
Additionally, you should think about the lifetime value those people create for your business. Lifetime value refers to the revenue a customer will generate through their customer lifespan. If you offer a service and a customer is satisfied with it, that customer will most likely come back. This adds to their lifetime value.
Again, you place an ad on Facebook, but this time, out of the 5000 people who see your ad, only 150 users click on it and are directed to your landing page. This equals a CTR of 3%. Considering the same conversion rate of 5%, it means that 7,5 people bought a product/service from you. Assuming they spent an average of $100, it equals a revenue of $750.
This is a -85% difference to the first example where your CTR was 20%. It’s a difference of $4250 in revenue.
Lastly, if your CTR is only 1%, it means that from the 5000 users who have seen your ad, only 50 users clicked on your ad and went over to your landing page. With the same conversion rate of 5%, it means that 2,5 clients bought from you. Assuming they spent an average of $100, this means $250 in revenue.
You see that in the first example where the CTR is higher, more customers converted and made a purchase. People need time to get acquainted with your product or service, and they also need time to make the decision to invest in it. This is why not everyone who sees your ad will actually turn out to be a customer. And this is also why you have to show your ad to as many people as possible to try to increase your CTR.
CTR matters, because the higher the CTR, the higher the chance of acquiring a customer.
How To Improve Your CTR?
The perfect campaign is a combination of three elements: PRODUCT + AD + LANDING PAGE.
To achieve a high CTR, it’s important to put some effort into the creative part of the campaign. Images, videos, and carousels should attract the target users and invite them to click and visit the landing page. If your click-through rate is low, you might consider adjusting your ad’s text or appearance to make it more interesting or eye-catching.
This is done by testing different creatives for your ads, ensuring that you find what works best for your target audience on a certain platform. Don’t just assume things about your audience. Our assumptions are wrong most of the time and only our target audience can tell us what really works.
You can also use discounts or other perks to make your ad more attractive. Let’s be honest, who doesn’t love a great deal?
This is why we should always be driven by the CTR as a key performance indicator for our campaign.
Additionally, don’t forget about your landing page. Increasing your CTR means that more people click on your ad and are directed to your website. But if your website or landing page is not clear, concise, and consistent with the ad, people won’t buy.
The landing page itself should clearly outline an offer and a precise message. It could be a promotion, new treatment, product, etc.
A Tool For Campaign Management
Creating, testing, and optimizing a campaign can be time-consuming and it requires marketing knowledge. This is why, for a long time, only big companies had the necessary resources to invest in marketing campaigns.
Thankfully, with the help of technology, this is changing. Nanos is a tool that manages your campaigns, whether you’re an expert in digital marketing or not. Its intuitive and clear interface makes it easy to create a campaign and launch it on different platforms. The technology even finds the best campaign settings for you, such as keywords and interests. Our AI technology ensures your overall CTR is improved. If your CTR is too low, our system will notify you of the necessary countermeasures to solve the issue.
Find out more about the benefits of using Nanos: