What is Click Through Rate and why CTR is important?

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Click through rate (CTR) is “a ratio  showing how often people who see your ad or free product listing end up clicking it.”

CTR is an important metric to evaluate the effectiveness of online marketing campaigns. CTR is measured for pay per click ads on Google or other search engines. Similarly you could measure CTR for display ads on Google, Instagram, LinkedIn or other such platforms.

Click through rate is measured for organic or free listings too. How many people click on your business listing on Google search or maps once it appears on the search results page? You could optimize the content such as headline, description, images and call to action to increase the number of clicks on your business listing. Higher the CTR, higher the number of people who take relevant actions such as visiting your website or profile or fill up a lead form.

Why is Click Through Rate important?

CTR is a measure of effectiveness. It measures the quality and relevance of the content of the ad, listing, email, video, presentation etc.

Higher the CTR, lower the cost per customer action.

So if you improve the click through rate, you will have more customers take relevant actions in the same budget.

CTR Example: Google My Business listings for “Pet shops near me”

Example for Click Through Rate. Search listing for query Pet shops near me
Example – Click Through Rate

The image above is the google maps listing for my search query “pet shop near me”. The third listing will surely have the lowest CTR. The address is not visible for me to decide if the shop is closest to my location. There is no profile image, no customer rating and the listing does not display the store working hours.

The first and the second listings would get more clicks and hence customer inquiries compared to the third listing. The description of the second listing is optimized to get relevant customer inquiries – “kittens and cats”.

Click Through Rate Calculation

Let us consider another example. The owner of Acme Pet Shop spent $100 a month on Google PPC ads to get more customer inquiries for pet care products.

Given below is the ad summary for the first month:

Ad impressions2560Number of times the ad was viewed
Number of clicks47Count of clicks by viewers of the ad
Click through rate (CTR)1.84%Clicks / Impressions
Total amount spent$95.60
Cost per click (CPC)$2.03Amount spent / number of clicks
Table 1: Click Through Rate Calculation

The number of impressions or ad visibility was a result of the keywords selected, target location and keyword bid. If Acme Pet Shop could improve the CTR from 1.84% to 3%, the ads would receive 77 clicks in the same budget. That is an improvement of over 60%. The cost per click would reduce from $2.03 to $1.24.

Monitoring and improving the CTR for your ads, listings and emails get you more customer actions in the same budget. There are several benchmarking reports available for you to compare CTR of your campaigns.

Conclusion

CTR as a metric should not be restricted to PPC and display ad campaigns. It has a wider use. For example, you could include links to all marketing and customer engagement emails and monitor click through rate for your email campaigns. The insights will help you improve the email content and offers. If you run an ecommerce website, CTR needs to be measured for all your email and SMS communication – abandoned cart emails, order confirmation emails, promotional emails etc. You could also measure CTR for invites to events, webinars, LinkedIn connection requests etc.

Improving click through rate ensures maximum output in the form of relevant customer actions.


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By Nitesh Verma

Founder - Business Management Blog

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