In the world of e-commerce, a consistent flow of qualified traffic is king.
That’s why, on an almost daily basis, my students come to me and ask how they can tell whether their Facebook advertising is working to effectively deliver a consistent flow of leads.
It seems like a simple question, but there are a huge number of variables at play within any digital ad campaign. Fortunately, we don’t have to guess at what’s working; as I always tell my students, “let the data tell you the story."
So, if your sales aren’t where you want them to be this quarter, take a look at these four critical numbers so you can see if your advertising is working or not:
Cost Per Purchase
The most critical number is your acquisition cost or cost per purchase. That number tells you how much it costs you to find and convert a lead (that is, get someone to buy your product or service). You typically find this number by dividing the amount of advertising spend by the number of customers.
If the cost per purchase is lower than the profit that customer gives you, then you’re making money! If not, it’s time to lower the cost per purchase, and that’s where the other numbers come in.
Click Through Rate (CTR)
The second critical number is your CTR, which has fairly accurate standards now for different types of advertising — like banners, Facebook ads, AdWords, etc.
When it comes to Facebook ads, I want to see a CTR that is higher than 1.5%. If it’s lower, that shows that your product or service isn't resonating with your targeted audience. Therefore, it’s time to play with your targeting, ad design, or ad copy to see where the gap exists.
Cost Per Click (CPC)
The next data point you want to look at is your CPC; that is, how much it costs to get a click (i.e., visitor) to your website. You want this number to be as low as possible, but it will vary depending on the type of product or service you’re selling.
That said, I find that anything under $1.00 CPC is a sustainable and effective benchmark. You can still get your model to work if your CPC creeps up to $1.50, but if you surpass that high-water mark, stop right away and reassess your targeting, because you may be aiming at the wrong set of prospects.
Cost Per Thousand (CPM)
The last piece of data I look at in a given Facebook campaign is the cost per thousand impressions (CPM). That shows you how much it costs every 1,000 times your ad is shown. The CPM data will tell you how competitive your market is.
If you can deliver your ad for a CPM of less than $15.00, you’re in a great position, because it means the people you’re targeting aren’t being heavily targeted by competitors (that’s a good thing). However, if your CTR and CPC are very low, but your CPM is way above $15.00, it’s an indication that you don’t have the right product and people aren’t interested in clicking and buying what you’re selling.
Be Careful Drawing Conclusions Too Quickly
Even given these data points, there are still some flaws in the system. There will be questions that take time to clearly answer, like whether the issue is the product, the audience, the offer, or an ad message that is not resonating.
That’s why it’s essential to develop the habit of testing your creative messages and your audience types. That’s also why I remain flexible on the products I’m offering, because consumer tastes change and I want to be able to quickly set up e-commerce stores to fill those needs.
So, the next time you’re running a Facebook ads campaign and you’re not sure how to tell what’s working, use these four critical numbers to get a sense of how you’re doing. Assumptions are the marketer’s worst enemy, so remember to let the data tell the story!
Fred Lam is the Founder and CEO of iPro Academy, Zero Up™, Water Liberty, and several other ventures. Fred teaches people how to create their online e-commerce businesses in a carefully, easy-to-follow, step-by-step process backed by his book, The Traffic Trilogy.