What Is CTR (Click Through Rate) and How Do I Use It?
What does CTR mean?
CTR stands for “Click Through Rate”. It’s a measure of how frequently site users click a piece of online content.
What is the CTR formula?
To understand how marketers use CTR, it’s important to understand how it’s calculated. CTR is calculated by dividing the total number of clicks for a desired action by the total number of impressions that give users the opportunity to take that desired action.
Let’s take a look at an example. Suppose you launch an online banner ad for your business. You buy 100,000 impressions of this ad. In other words, your ad will be shown 100,000 times. When users click the ad, they are taken to your website. In this case, clicking the ad is the desired action.
After your ad is shown 100,000 times, you check the results and you see that the ad was clicked 1,000 times. In this example, the numerator (the number of clicks for your desired action) is 1,000, and the denominator (the total number of impression that give users the opportunity to take your desired action) is 100,000.
Here is the CTR formula for this example:
By dividing 1,000 by 100,000, your click through rate is .01. As a percent, the CTR is 1% in this example. This means that your ad was clicked 1% of the time when it was shown.
How is CTR used?
In our above example, we saw that the online ad had a click through rate of 1%. So what does this mean? And how do marketers uses this CTR data?
Click through rate is a very important metric in digital marketing because it helps measure the effectiveness of an ad.
Many digital marketers buy a quantity of impressions when launching online ads. They pay a fixed rate for a fixed number of times their ads will be shown. However, note that marketers pay the same price regardless if the ad gets 1,000 clicks or zero clicks. That’s where CTR comes in. It is one of several quick metrics to help show the effectiveness of an ad.
A CTR analysis example
Let’s look at one final illustration. A digital marketer is trying to sell tickets to a local event via online ads. The online ads feature a picture of the event and prompt users to click the ad. Once the ad is clicked, users are directed to a website where they can purchase tickets to the event.
The marketer spends $1,000 to buy 300,000 impressions of an online ad. In this illustration, the marketer wants the highest CTR possible, because 1) they’ve already spent the $1,000 (and the price won’t change regardless of how many clicks the ad gets), and 2) the goal is to get users to the ticket purchasing website.
How to improve CTR?
There are two major levers to improve click through rate:
Improve the ad creative. Users will not click an ad if the creative design does not resonate with them. Make sure you add a call-to-action button (also known as a CTA). This is a little “button” on the ad that tells users to “click here”, “buy now”, or “learn more”. It seems simple, but simply by adding a CTA, most ads will instantly show a higher click through rate.
Narrow down ad targeting. One reason for a low CTR could be broad or incorrect targeting. For example, ads for baby strollers won’t garner much excitement if they are being shown to people who don’t have children. Think about the people to whom your ads are relevant, and then purchase impressions within that group.