Click Through Rates - What are the limitations?

Click through rates (CTR) is a term often heard, but not always understood.  A click through is when an individual clicks on a link, ad, or web component online, which directs the user to a specified area online (site, video, form, etc.).  In marketing terms, this is a basic call to action. 

Click Through Rate

A click through rate is the  “number of click-throughs for a specific link divided by the number of times that link was viewed” (P.I. Reed School of Journalism, 2013).   The click through rate can be used as a measurement of return on investment for pay-per-click advertising.  This sounds simple, but in reality many factors must be considered to properly term an “effective” click through rate. 

Channel Differentials

CTR’s vary based on the channel in which they are displayed.  Search channels provide a higher  CTR than with display ads and banners.  Searches are more aggressive; individuals are looking for information and will click on the best fit.  When individuals see display ads, they may be interested, but if it does not fit the immediate need they may be more passive and not click as quickly.  These ads are often displayed to the user when they are doing something else and not actively searching for the information in the ad (Raehsler, 2012). 

Factors Impacting CTR

According to Lisa Raehsler (2012), a definite answer in regards to a good click through rate can be difficult to provide because of varying factors:

•   Audiences and targeting

•   B2B or B2C

•   Brand or non-branded

•   A keyword's place in the search funnel

•   Ad copy's creative messaging - CTA

•   Type of offer

•   Display URL

•   Images/design

•   Industry competitiveness

These factors can make it difficult to determine the proper click through rate for a specific website, business, or organization.

According to Raehsler (2012), non-branded ads may see a 1 to 7 percent click through rate in comparison to branded ads which can see a 3 percent and up CTR during searches.  Display ads are normally around .05 percent, with advertisers revamping ads when they fall below .03 percent. 

Click through rates are important for businesses with small budgets.  Small, local businesses need to understand click through rates in order to properly adjust and measure online campaigns.   Ad design, ad placement, and impressions can all prove very important for a small business conducting an online campaign.  These ads may be branded, but if individuals are unfamiliar with the brand, CTR may be lower.  It is also important to go local.  Placing ads locally in an area where consumers are more familiar with the brand will provide a higher CTR and a higher ROI.  That being said, when introducing a new business online search engine paid ads should be used because of higher CTR than display ads. 

Understanding how to calculate the CTR, the proper ratio to expect, and which online methods will produce the best outcome for a business is critical in maintaining a positive online marketing strategy that relies on CTR.   It is also important to remember to use other web metrics along with CTR to understand the full effect of the campaign.  Using CTR alone is not the best method, CTR is a basic call to action measurement, but without a definite follow through measurement, this rate can be misleading.  Therefore web metrics that measure beyond the basic call to action can be used along with CTR to provide the most insight and guarantee the most bang for the advertising buck.  

Referral Traffic: A Consumer Roadmap

Referral traffic is an important web metric because it can be used to analyze consumer behavior in regards to internet usage.  By following referral traffic, businesses can determine how consumers are arriving at a website, which other sites have links to the website, which search engines provide the largest amount of traffic to the site, and if other means of web advertising are directing traffic to visit the site. 

Referrer

A referrer, when speaking in terms of web metrics, “describes the source of traffic to a page or visit” (P.I. Reed Schoolof Journalism, 2013).  This traffic can originate from different referrers (P.I. Reed School of Journalism, 2013):

•        Page referrer – describes the source of traffic to a page

•       Session referrer – first page referrer in a visit

•       Visitor referrer – first page referrer in a visitor’s first session. 

Traffic

Most traffic that is directed to the website through (Kaushik, 2010):

• Direct traffic– Individuals type a specific web address into the URL or use a bookmark to access the website. Direct traffic represents individuals who know who you are, know your web address, know what they are looking for, and may be returning visitors.  A higher percentage of direct traffic suggests a healthy consumer connection and retention rate (Kaushik, 2010).
• Referring sites – A link located on other sites that individuals click through to arrive at another website. Referring sites are important because they provide information that encourages the use of a link to your website.  This may be a site with an affiliation to your business or industry, which could be used to establish marketing relationships and determine which information on your site individuals find helpful (Kaushik, 2010). 
• Search engines – When individuals type in a description or keywords in the search bar of search engine (Google, Yahoo, Bing, MSN, etc), specified sites will appear, both in the organic and paid search area. Search engines account for the at least 1/3 of traffic on most websites (Kaushik, 2010).  Organic searches are the free searches, whereas paid searches are those in which a business has paid for a certain amount of impressions within the paid search area, most often at the top or side of the web search. 
• Other – This traffic is derived from display banner ads, email campaigns, social media outlets, etc (Kaushik, 2010).  This traffic metric can be used, along with other metrics, to determine a generalized return on investment of a specific campaign. 

Real World Example

 Using Hayworth-Miller Funeral Homes web analytics, an independently owned funeral home in North Carolina, one can see the majority of visits, 77%, from January 1, 2014 – January 19, 2014 would be considered from direct traffic.  This traffic may also be directed from search engines using a secure search engine like Safari, or a mobile device without proper referral tracking.  Seven percent was traffic that originated from the site, with 10% of the traffic coming from search engines, and the remainder of the traffic coming from a referrer site or other means such as display ads. 

As a funeral director at Hayworth-Miller Funeral Home, I can see that most of the visitors have a bookmark or are familiar with the Hayworth-Miller website.  This is great news for consumer retention.  I also see that an array of search engines are used as referrals, whereas the local newspaper is the fifth highest referral source.  This is not a surprise as most individuals look online for obituary listings which are linked to the Hayworth-Miller website for online condolences.  Consumers use and knowledge of the website (shown through direct traffic visits) is shown by the high amount of direct traffic.  This may be attributed to print advertising.  The much smaller percentage of search engine referral sites shows a need for more online presence and possibly more paid searches. 

Referral metrics can be used alone or with other metrics to provide detailed referral information that can be used to determine the most popular keywords individuals use to get to the website and which pages within the site most visitors are first directed.  All of which prove helpful in designing an effective online marketing strategy.

References:

Kaushik, A. (2010).  Web analytics 2.0: The art of online accountability and science of customer                 centricity.  Indianapolis, IN: Wiley Publishing, Inc.