Decoding CPM, CTR, & CPC
Understanding the performance of your marketing campaigns on LinkedIn boils down to interpreting a handful of key metrics. CPM (Cost Per Mille), CPC (Cost Per Click), and CTR (Clickthrough Rate) are the cornerstone metrics that tell the story of how well your ads are performing. While each metric has its own nuances, they are deeply interconnected.
Let’s break down each of these metrics to understand their implications and uncover the larger story they tell together.
CPM (Cost Per Milli)
CPM measures the cost to show your ad 1,000 times. This metric is a starting point into understanding how competitive it is to place your ads. On LinkedIn, CPMs typically range from $20 to $30, but they can vary widely based on audience size, activity, and demand.
A high CPM ($60+) signals challenges in reaching your audience. This might mean from a highly competitive niche, an audience that’s inactive on LinkedIn, or targeting executive roles that demand premium ad placements.
What can you do if your CPM is high?
- Run high-performing ads: Ensure your ads are highly relevant to improve your relevancy score, which may reduce CPM.
- Open Audience Network (AN): Curate it carefully by excluding irrelevant categories and targeting only relevant sub-categories to extend your reach.
- Expand your audience: Broaden targeting parameters while maintaining relevance.
- Separate campaigns: Target lower-level positions or influencers who might be easier to reach and can still impact decision-making
What About Low CPM?
Low CPMs (e.g., $7-$8) suggest that it’s easy to place ads for your audience. While this seems advantageous, it’s important to ensure the impressions are meaningful. With a low CPM:
- Tighten your audience to avoid serving ads to irrelevant users.
- Consider turning off Audience Network or adding exclusions to maintain focus.
CTR (Clickthrough Rate)
While CPM measures placement, CTR tells you how well your ads are resonating with the audience. A benchmark CTR on LinkedIn is 0.4%, meaning four clicks per 1,000 impressions. This metric reflects the level of interest your ad content generates.
What If Your CTR Is Low?
Low CTRs usually point to issues with the ad content rather than the landing page or company profile. To address this:
- Refine relevance: Tailor ad content to the specific needs and interests of your audience.
- Review your audience: Ensure targeting aligns with your ideal customer profile (ICP).
- A/B test ads: Identify whether copy or imagery resonates better by testing variations.
- Create new ads: If all ads underperform, design a fresh set focusing on pain points, benefits, and visual tone.
CPM and CTR work tell a story together
Look at both metrics together to understand how to proceed:
- Low CPM + Average CTR: Acceptable—you’re driving traffic effectively but might benefit from incremental tweaks.
- High CPM + High CTR: Great—your ads resonate despite competition. Keep doing what you’re doing.
- Low CPM + Low CTR: Concerning—your ads are easy to place but fail to engage. Tighten your audience and refine your messaging.
- High CPM + Low CTR: Red flag—it’s both costly to place ads and they’re not resonating. This situation requires immediate action to adjust targeting and ad content.
CPC (Cost Per Click)
CPC is where everything comes together. It synthesizes CPM and CTR into a single performance indicator, reflecting how much you’re paying for each click, which directly ties to campaign ROI. Based on LinkedIn benchmarks, if you have a $20 CPM and a 0.4% CTR, your CPC would be $5.
A CPC of $5 or less is ideal, while $5-$10 is okay but worth monitoring. Once CPC rises above $15, it’s time to seriously reassess your strategy.
High CPC indicates inefficiencies in either CPM or CTR. Analyze both metrics to pinpoint the issue:
- Low CPM + Very Low CTR: Ads are served widely but fail to engage.
- High CPM + Low CTR: Ads are expensive to place and lack engagement.
CPC analysis should also consider the customer journey. A high CPC might still be justified if it leads to high-value conversions, such as enterprise-level sales. On the flip side, low CPCs that don’t generate meaningful engagement or conversions may require a rethink of campaign objectives and creative direction.
Bring it all together
Look at CPM, CTR, and CPC together to see the big picture of your campaign’s performance. A few scenarios:
An effective way to evaluate these scenarios is by mapping them to your campaign goals. For example, if the objective is brand awareness, a combination of high CPM and high CTR might be acceptable despite a higher CPC. However, for lead generation, the focus would shift to achieving low CPCs with balanced CPM and CTR metrics.
Keep testing and refining to find what works.