The Cost Revenue Ratio (CRR), also known as efficiency ratio, is a way of comparing expenses to revenue. While the CRR is mainly used in banking businesses, it is also an interesting key performance indicator for performance marketers.
The calculation is very straightforward: Just divide the spendings of your campaign by revenue of that campaign. The result will be a percentage, telling you how much you have spent to generate one euro/dollar of revenue, meaning: the lower the percentage, the more efficient at creating revenue. If your result is larger than 100%, your costs are higher than the created revenue – optimization of the campaign is urgently needed!
To use this metric for measuring your Google Adwords campaigns, make sure to assign a value to each conversion action. This will enable you to use the “Total conv. Value” column in your campaign overview, you will need it to calculate the CRR.
The result could look like in the following example:
Here you see an extract from a campaign performance report with the Cost Revenue Ratio in the last column. Cost of the respective campaign gets divided by total conversion value. When not having any CRR benchmarks from your financial department, it might be a good idea to use the brand campaign as orientation. This campaign will most likely reach the best cost revenue ratio you can find in your account, so the rest of your campaigns should be somewhere between this and 100%, the closer to the brand campaign benchmark, the better.