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Basic Facebook Ads Math Every Marketer Has To Know!

Marketing, social media, advertising
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Guest12120

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Few months ago, I talked to a potential consulting client who had a pretty unique football related product that sold for $25. He was convinced that a top FB Marketer can bring him sales at 5X Return On Ad Spend. He expected a cost per purchase to be on average $5.

I explained to him that results like this are almost impossible and I explained why. This was the last time I heard for him.

Apparently he didn't want the facts to stand in his way :rofl:

So why is $5 CPP so hard (almost impossible) to achieve?

When you run ads on Facebook, or on any other advertising platform, there are certain benchmark you can use to see if you can afford to pay for traffic.

First, you look at the Cost Per Click. This is how much you will have to pay for one person to visit your store. If you optimize your ads for Purchase and your target audiences in the United States, a good benchmark is $1.00 per click.

:star: If you pay $20 for 1,000 impressions (CPM) and 2% of people that see the ad click the link (CTR), you get $1 CPC.

Let's just assume, for this example, that this guy's product is so freakin' great that people just can't help but click the link to check it out and he would pay only $0.50 per click.

Then you need to look at your store, and estimate the conversion rate. Average CR is 1.4% (according to the survey of 1,127 stores done by Littledata.io). However, for a $25 impulse buy, cool product I would expect to have a CR of 4-5%.

So here is our example:
CPC - $0.50
CR - 5%
The CPP is $10.00!

So even if his ads are performing better than 95% ads out there and the store is in top 10% of all stores in terms of conversion rate, he would still have to pay at least $10 for each purchase. Getting a $5 CPP from cold traffic would be a miracle in this case.

:bullseye: Before I run paid traffic to the offer, I look at the numbers and see if I can be profitable with the $25 CPP ($1 CPC and 4% CR). If not, the offer needs to change.

It's of course possible to have a CPP lower than $25, but if you need much better ad and store performance than that to turn profit, you may want to rethink your offer.

:star: This doesn't apply if you run a subscription based model or you can wait 60-90 days to turn profit (repeat buyers).

I decided to share this as many store owners I talk to have completely unrealistic expectations when it comes down to running paid traffic.

Let me know if you have any questions.
 
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RazorCut

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So true and so easily overlooked. It actually makes me wince when a seasoned business owner thinks they can make a fortune with a low cost item on Facebook. Simple maths say it's near impossible unless you have fantastic converting upsells or sell at a loss and make the money on the backend with repeat business or subscriptions.
 
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Guest12120

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Simple maths say it's near impossible unless you have fantastic converting upsells or sell at a loss and make the money on the backend with repeat business or subscriptions

I work with a client that sells $11.95 golf gloves. To get the AOV up, we created bundles (1, 3 and 5 gloves) and a post purchase upsell. This nearly doubled the AOV and made the campaign worth while.

I also know the market very well so our CPP on FB is $13 -$14 but we also get a lot of sales through email (cart abandonment + flows + campaigns).
 

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Is $1 really the average CPC or a good benchmark?
My average is less than $.50 and I am spending the majority of the money in November/December. I only have experience running ads for my own products but $1cpc seems high?
 
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Guest12120

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Is $1 really the average CPC or a good benchmark?
My average is less than $.50 and I am spending the majority of the money in November/December. I only have experience running ads for my own products but $1cpc seems high?

26933
CPC greatly depends on the objective you use for your ads. Traffic will bring you more clicks but less motivated traffic. Purchase clicks will be more expensive but the visitors will be more likely to buy.

This being said I also see $0.50 CPC on some Purchase campaigns too. If the ad is engaging (high CTR) and your audience is not too competitive (low CPM), you can see great numbers. Like in this case:

26934

When I see $1 CPC and the campaign is not performing, I'm looking at other parts of the funnel first.
 

broswoodwork

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What am I doing right...?
 

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RazorCut

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@broswoodwork I looked again at the stats you posted above and it seems like you were getting a $1 CPM. In the first screenshot it shows you've reached 49,167 people for $53. I don't think I've ever seen anything like this.

Would you mind sharing how you're able to get cheap traffic like this and tell us more about the sales funnel?

Screenshots with stats without any context might be misleading and don't tell the whole story. I would love to learn more about your campaigns.
 
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broswoodwork

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So you must have one hell of a lead magnet. What's compelling so many people to click?

Tell us more about your sales funnel...
Haha. I don't know what half of those words mean...

I have ok pics taken by previous customers. My copy is simple, short, direct. Half the people don't read anyways... It tells the short version of the whole story, and ends with an invitation to message me to start a conversation.

After they reach out, we go over options, show samples of past work, I screen them to make sure they're not going to be a headache for me, and I send them over to the website to purchase if everything lines up.

I'm not sure if I'm answering this right...
 

broswoodwork

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Maybe pivot to your own PPC agency. Seems like you're outdoing the pro's. You can call it brosppc.
Ready to laugh?

If I did start a ppc agency, I'd have to start one of those "how do I advertise my advertising agency" threads that summon the spiciest memes.

I think I'm two things: one lucky, and fell into a perfect sized facebook hole; and two, just instinctually good at selling this one thing from years of repetition, because I know I'm not particularly smart or innovative.
 

RazorCut

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Ready to laugh?

If I did start a ppc agency, I'd have to start one of those "how do I advertise my advertising agency" threads that summon the spiciest memes.

:rofl: :rofl: :rofl: Yes I see that all the time on some of the marketing groups I'm a member of.


I think I'm two things: one lucky, and fell into a perfect sized facebook hole; and two, just instinctually good at selling this one thing from years of repetition, because I know I'm not particularly smart or innovative.

I think you do yourself a disservice. Those are exceptional stats Bro. You certainly have a feel for it even if it is niche specific.
 
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Guest12120

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After they reach out, we go over options, show samples of past work, I screen them to make sure they're not going to be a headache for me, and I send them over to the website to purchase if everything lines up.
How do potential customers reach out to you? Do they buy online, over the phone or in person?
 

broswoodwork

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How do potential customers reach out to you? Do they buy online, over the phone or in person?
They reach out on Facebook messenger. We chat about what they need, and I make sure we're a good fit for each other; then, I send them to my website to pull the trigger.

I guess it's like a messenger based inbound call direct advertising thing.
 

softwareRules

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What am I doing right...?

It's hard to tell, have you tried multiple variations of the ads and headlines?

I've had decent click-throughs for small content marketing blog content. The best has been getting click throughs on a product (iphone case, yeah yeah I know it's a crowded market, just using it as a test) and then saw zero conversions so I know the ads work but the product page is shit haha.

Another one that turned out well was turning a podcast into a video and boosting the video post. Got 50 play-throughs, in comparison on YouTube the video only has 18 views and that's with me spamming twitter and my buddies to watch it.

Conclusion: Facebook ads still work.
 

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