The Meaning Behind the Metrics: Click-Through Rate and Conversion Rate

If you’ve been exposed to digital advertising, you’ve likely heard of click-through rate (CTR). CTR, along with conversion rate, are pretty common metrics for reporting on digital advertising success and benchmarking. But, why should you care about these numbers? How do they impact your business?

Get to Know Click-Through Rate

CTR is the percentage of people who clicked your ad per the times the ad was seen (impressions). It’s important because it gives you quantitative data to prove how well your content is (or isn’t) resonating with your audience. The higher the CTR, the better tailored your content is since it is compelling users to click. If your CTR is sub-par, it’s probably a sign that your content isn’t well-suited for your target audience.

What is a good CTR?

You might find yourself asking: what is a good CTR? The average CTR you should expect depends on the platform (Google, Facebook, etc.), type of campaign (display, search, etc.) and even the industry you are in. Using platform and industry averages is a good place to start, but one of the most beneficial ways to measure CTR is to benchmark against yourself. When reporting on CTR, you should review by campaign as well as across the account by certain time frames. If you are seeing improvement from one campaign to the next and year-over-year, that’s a good sign — even if there isn’t an industry average that matches your performance.

Take It Up a Notch

Now that you know the importance of CTR, let’s turn to another telling metric — conversion rate. There was a time when advertising was focused largely on impressions. However, in today’s digital landscape, simply knowing how many people saw your ad isn’t enough. CTR gives you deeper insight by telling you how many people took notice of your ad and were enticed enough to click. Conversion rate takes you one step closer to understanding business impact.

Conversion rate helps to completely close the loop by telling you the percentage of people who saw the ad, clicked and completed a valuable action. The valuable action is determined by you and your business goals. It can be filling out a form, engaging with a piece of content, or even completing a sale if you are using e-commerce. Afterall, the ultimate goal of your advertising is to convert those who see it to a customer or at least a prospect. Conversion rate helps you understand how well you are doing that and conversion rate optimization can help you achieve it.

1. Impressions: the number of people who saw your ad.

2. Clicks: the number of people who clicked on your ad.

3. Conversions: the number of people who visited your website after clicking on your ad and then completed a valuable action (phone call, contact form, etc.).

A. Click-through rate (CTR): the percentage of people who clicked your ad per the times the ad was seen (impressions).

B. Conversion rate: the percentage of people who saw the ad, clicked and completed a valuable action.

Put the Pieces Together

By looking at CTR and conversion rate across platforms, audiences and campaigns, you can uncover the best messaging and ideal platform for reaching your audience.

Think back to the days when traditional advertising was your only option. Suppose you are a local company that purchased a billboard on a nearby highway. Perhaps it was sold based on the estimated number of impressions it will have. Of those who drive past it, it’s nearly impossible to tell how many actually saw it compared to how many were distracted and missed it completely. It’s even more difficult to tell how many people saw the billboard and visited your store or website as a result. Because there is no way to track that, it’s nearly impossible to attribute a certain number of sales to the billboard.

Digital is different. Because of trackable metrics like clicks and conversions, you’re able to use key performance indicators like CTR and conversion rate to measure how your ads are performing and how those ads are ultimately impacting your business.

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