Facebook Ads Business Manager can throw a whole bunch of numbers your way, but which ones actually matter to the success of your Facebook Ads Campaign? Let’s dive into the ones that matter most to your bottom line.
The most important rule of Facebook Ads is to make sure your ads are profitable.
Profitability, however, doesn’t always mean an immediate return on your ad spend (ROAS) because not everyone will convert into a paying client on the spot. You need to know what your customer’s lifetime value (LTV) is.
For example: If you are selling a monthly SEO Service, paying clients will stick around longer than just 1 month and we hope to get an average of 6–12 months commitment from them. That means that at our current rates, a client is worth between $5,000 and $30,000
This doesn’t include any upsells we might introduce to our members during the time of their membership, so effectively we can increase the LTV whenever we want by creating new products and adding more value to the members while they are part of our eco-system.
If you’re running an eCommerce store, the LTV will depend on the type of product that you’re selling. People will generally buy high ticket items far less than they would low cost products. This means that if you are selling a product that has a limited lifespan due to wear and tear or simply has a limited number of uses — people will come back to buy again if they’ve had a good experience with your product, your store, and your value proposition.
The way to get these people back onto the store is usually done through an email list and social media presence. So while the immediate ROAS could be a 5X (you spent $5 to make a $25 sale) — the LTV could be worth 20X if they come back three more times to buy that $25 product; turning that $5 into $100 revenue.
Default metrics to keep an eye on:
Link Click Through Rate (LCTR) — This is an indicator of how curious people got after seeing your ad. While we aim to have at least a 1% LCTR on “cold traffic” (people who have never heard of you or your business), once campaigns start using things like Lookalike audiences and retargeting, we expect this to climb to 2–3% LCTR because these are “warmer” audiences.
Cost Per Click (CPC) — This is essentially how much you’re paying Facebook to get that click/landing page view. You’ll need to know your landing page conversion rates to know how much you can pay CPC and still stay profitable.
Cost Per Mille (CPM) Cost per 1000 impressions — This is how Facebook charges its advertisers. CPM is mainly influenced by your audience targeting. For example — we see a lot of new coaches who have done a Facebook course or two start building audiences around Marie Forleo and other popular coaches in their space. What happens here is that when a lot of people start targeting that as an audience interest, Facebook has to decide whose ads they are going to serve. Besides Expected Actions of the user after seeing an ad, and Relevancy — Bidding is a large part of Facebooks decision-making process. The more people want to get in-front of a specific user, the higher the bids need to be considered, the higher the CPM usually runs. This is why we often advise to run a broad audience at first and let Facebook do its magic with their pixel data. While a lot of courses still say that you should be targeting around 500K-1M audiences — the truth is that this approach has become more expensive than broad audience targeting. Always be testing however!
Frequency — This is a number that Facebook gives your ad and how many times the same person has seen it. As a rule of thumb, for cold audiences, we try and stay under 3. For retargeting, however, we sort of don’t care how high the frequency number will get. (One of the things to understand is that when people see your ad too many times, they often “hide” the ad, telling Facebook you’re basically annoying them. This will affect your metrics as Facebook doesn’t want their users to have a negative experience on their platform, so your CPC and CPM (Cost Per Mille) will go up and you’ll lose more auctions.
At the end of the day, you need to calculate what an acceptable Cost Per Acquisition (CPA) is compared to your LTV to make sure you’re running your ads profitably. Find out more about our Facebook Ads Management Services here.