This is a very simple primer guide, but one that everyone who does PPC should understand. There is a lot of information packed into a condensed post, please feel free to ask for any clarification. Together, we can all create a thread that will help those new to the process understand exactly what all of the PPC metrics are, and how they are determined.
The Keyword
The search process starts when a consumer has a question to be answered. This could be anything from where do I buy shoes to exploring vacation options. At this point, the searcher forms an idea of what to look for. This idea is translated into keywords, or a search query. After inputting a query into a search engine, the searcher is presented with a set of search results (which include ads). At this moment, your ability to make a conversion has already started.
When your ad is triggered, it's considered an impression. At the moment your ad has a statistical impression, it also has the ability to connect with the searcher.
The Click
The searcher will then make a decision: to click your ad, to click another option on the page, or just search again if they don't see something that appears to answer the question they are asking.
This is the first metric that needs to be taken into account: impressions (when your ad is presented to a searcher).
If your ad makes a connection with the searcher, then he will click your ad. The act of clicking on an add then triggers two metrics that must be taken into account:
The Conversion
A visitor then arrives on your landing page (the page on your website that you've designated to be connected with particular ad), this triggers yet another statistic: page view.
When a searcher inputs a search query, she has certain expectations of information. If your ad meets that expectation, the user will click your ad resulting in a page view.
At this point in time, your landing page must meet the searchers expectations. If your page does not meet expectations, she will not follow the action you wish her to take.
If your page meets his expectation and has the proper landing page elements [webmasterworld.com] (or is a One Page Wonder [webmasterworld.com]) to convince him to follow your action, he will be considered a conversion (A conversion is a predetermined action that measures the success of your advertising campaign. It could be a sale, a download, a contact, etc). (Tips: Increasing Conversion Rates [webmasterworld.com])
When someone converts on you landing page, this sets off another slew of metrics:
The Consumer
Let's think about the consumer, the one who ultimately determines the success of your campaign.
A consumer's conversion process contains a list of expectations:
The Metrics
Each of those expectations plays off one another. The search query has an effect on the ad's CTR. The ad copy has an effect on the page's conversion rate. The ad's cost per click has an effect on the total ad cost and ROI. The landing page has an effect on conversion rates. The entire process is interrelated. If you cut off any part of the formula, you are not taking into account the entire search to conversion process.
By examining all of your metrics, you can start to see visitor patterns. Examine what circumstances convince a searcher to convert on your website and you'll start to see patterns. Then take a deep look into the circumstances that cause people not to convert and examine those patterns.
If you:
Understand the search process from the user perspective
Understand how various metrics are determined
then, you can start to improve your conversion rates by improving the user experience.
I agree and here paraphrase the overview:
Conversions are about building relationships.
Building relationships is about building trust.
The relationship begins with the first impression,
and continues to the landing page,
and through the sales process,
until the sale is made.
The relationship then shifts to retention, support and up-selling,
where the trust built during the initial process really counts.
One note:
Cost per conversion (number of conversions divided by ad spend)
Cost per conversion (ad spend divided by number of conversions)
