The most common answer I give to struggling Facebook advertisers who want to know whether the results they’re getting are good or bad is simple: It depends.
What’s a good CPC? CPM? Cost Per Conversion? Conversion Rate? Cost Per Lead? Cost Per Purchase? Click Thru Rate?
It’s not that I’m trying to be difficult. And it’s not that there isn’t an answer to be found. But there are limitless factors that add context to make an accurate evaluation possible.
Back away from claims that you should aim for a universal rate or cost that applies to everyone. There are few, if any, absolutes. Yes, it depends.
Let me explain…
What is a Good CPM?
CPM (Cost Per 1,000 Impressions) is possibly the most overlooked metric that leads to high or low costs. If CPM is low, you can overcome a low conversion rate to get a good Cost Per Conversion. If CPM is high, a good conversion rate may not lead to profitability.
CPM is driven by many factors, including audience size, competition, seasonality, placements, and ad quality. Whether you have “high” or “low” CPM is all relative.
If you only target users in the US, your CPM will be much higher than those with an audience in India.
If your primary strategy is exposing your brand to cold audiences using lookalike audiences, your CPM will be much lower than the advertiser who focuses on remarketing to their most engaged visitors.
You should expect that your CPM during the holidays will be higher (double, triple, or more in some cases) than during off-peak times.
A high CPM isn’t necessarily bad. It requires your ad to be efficient and effective. You may be reaching a small or desirable audience who is much more likely to act.
A low CPM isn’t necessarily good. It may be the result of reaching a low competition, undesirable audience.
What is a Good Cost Per Purchase?
How much does your product cost? If you’re spending $50 to get a single purchase of a $10 product, you’re losing money. If you’re spending $50 to sell a $1,000 product, you’re doing damn well.
How well-known is your brand? Not everyone buys based on price. If you are new to market, it may cost more to generate new customers.
Are you selling to current customers or prospecting for new ones? If your product will need to be replaced every six months, you should have success selling to those who bought from you six months ago. But, the cost to get a sale should be higher when getting to a new customer.
Are you remarketing? Your costs should be amazing. The problem is the volume probably won’t be.
What is a Good Cost Per Lead?
What do you consider a lead? What is the value of a lead to you? How likely is that lead to buy from you? How much revenue will the average lead generate?
A lead could be as simple as someone signing up for a free ebook. Or they may be someone who is interested in buying a car and requests a call with a salesperson.
I don’t care if you’re getting 10 cent leads if none of those leads ever buys from you. Quality matters. Lifetime value matters. What that lead ultimately does matters.
In order to evaluate your performance, you need to first understand the value of an action to you. How much does that product cost? What is the cost for you to produce that product? What is the maximum Cost Per Purchase you need to be profitable?
Know the rate leads convert to a paying customer. Have an idea of an average lead value and regularly update that average based on current data.
But, you should also understand the factors that impact your ability to get “good” results. Is it a highly competitive time? Are you targeting current customers or prospecting for new ones? Is it a difficult industry?
You need to make note of these things and understand the ceiling cost you can withstand and still be profitable. Don’t guess.
Avoid comparing your results to others that lack relevance. Industry and product matter. But so do factors that set you up for success, like strong brand recognition and a built-in audience via website traffic and email list.
Establish benchmarks that are most relevant to you: Your industry, your product, your business, and your audience.
Embrace “It Depends”
Don’t feel like you always need a clear answer when it comes to evaluating performance for your client. Help them understand WHY “it depends” and give them a better understanding of what success looks like to you.
That said, you can’t advertise blindly. You can’t always throw your hands up and say “it depends.” You need to fully understand the factors that contribute to the discovery of answers.
Does “it depends” resonate with you?
Let me know in the comments below!
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