Downloading brain dumps before deletion. To the 2nd grader, a 4th grader is a genius.
The recently built homes in a new residential development where I live all have a few things in common. They all look beautiful when they are completed, they're very nicely finished, and the new families who move in all appear very happy. There is one more thing they have in common, but it's not something the homes have, it's something they are almost all missing.
That's right - they don't have a lawn. I'm certain the developer didn't simply forget about it. In fact, it's a common practice that the yard is left incomplete. The new homeowner is required to finish it off. Within a few weeks of the new family moving in, they're off to their local garden center. They buy bags and bags of grass seed and set off to begin the process.
The seed is spread all over the barren soil. Every day it's faithfully watered. The sun warms the soil and the seeds start to germinate. But do we know how the new lawn will look? Not immediately. It can take more than thirty days to know exactly how the new lawn will turn out.
Fortunately, you don't need to wait thirty days to know if your new Facebook ad campaign will be profitable, or a complete dud. Of course, you can't know the outcome immediately, but it doesn't need to take as long as grass needs to grow. Initially, you set up the campaign to the best of your abilities, and then you wait for the results to come in. In this article we're going to discuss how to determine if your ad is a dud by covering:
Let's get started by discussing ad spend.
To start the process of determining if your Facebook ad campaign will be any good, you've got to spend some money. This is obvious, I know. The key to remember when you are spending money on advertising is that you are buying data. This data is education and will give insight into the quality of your ad campaign.
When you seed a lawn, too little grass seed will produce a thin, sparse lawn. Too much grass seed and the competition between seedlings will stunt their growth. When you hit the submit button for a new Facebook ad campaign, your budget will determine how much data you get back. The campaign schedule will determine how quickly. If your budget is too small, it will take a lot longer to get a meaningful amount of data. If your budget is large, data will come streaming in. Be careful though - Facebook is more than happy to take all of your money. You'll need to decide how quickly you want results versus - in the case of your ad being a dud - how much you're willing to risk.
It would be easy to recommend spending a certain amount on any one ad campaign, but that wouldn't be applicable in every circumstance. For some markets and some audiences, you can get a lot of data for only a small amount of ad spend. For more competitive markets, you must spend a lot more to get the same amount of data.
I'm going to focus on the markets that are less costly and less competitive. This means we'll be excluding advertising for lawyer services, insurance, home restoration, and other highly competitive markets. As a general rule, at the very minimum, you must spend $100 on an ad campaign to get enough data for it to be worth looking at. Less than that and the amount of data you'll receive is too small to make an educated decision. For this example, you should be getting between at least fifty to one hundred clicks on your ad.
This minimum amount of ad spend can't be spread over numerous images and differing ad copy within one campaign. Use a maximum of two ad images. Any more than two and the data will be spread over too many variables. For now, keep the images and copy variations to a minimum. By the time you've spent your initial budget, and hopefully have received one hundred clicks on your ad, you're ready for point #2 - click results.
Facebook is happy to give you some valuable info about your ad campaign. Actually, more than you need right now. We're going to focus on your click-through rate (CTR) and your cost per click (CPC). Both of these will give an initial idea of how well your ad campaign is performing.
The CTR is the number of times an ad was clicked versus the number of times it was viewed. Realistically, an ad will be clicked only a small percentage of the time. A CTR of ten percent is generally very good. That means ten clicks for every one hundred views. A CTR of five percent is acceptable, while a CTR of less than one percent is not good. The ad with a CTR of less than one percent needs to be rewritten or have a different image. How does the cost per click factor into this?
Facebook "rewards" an ad that has a good CTR by charging less for each click. Of course, there are other variables involved in the cost per click, such as target audience size and niche. If your cost per click is higher than $5, you probably don't have a very good CTR and should re-evaluate your ad. Again, this isn't including the more expensive niches that were mentioned earlier.
A good target for your cost per click is $1. If your cost per click is less than $1, there's a good chance your ad will be a great performer. If your cost per click is more than $2 per click, proceed with caution. There is some room for improvement. Having a low cost per click is desirable, but not a guarantee of the campaign being profitable, as we'll see in point #3 - conversion results.
Here's where we find out what actions a website visitor will take after clicking on your ad. The ad has taken them to your website - did they stick around, or did they leave? If they did stay on your website, did they opt-in to your lead magnet or make a purchase? This is critical information that you'll want to track. All the cheap clicks in the world don't help if a website visitor doesn't take further action.
How many leads did you receive over the course of your ad campaign? Divide your total ad spend by that number. There is your cost per conversion, also known as your cost per lead. It's good to know this number because it helps directly determine the profitability of your campaign. Just wait - there's one more step.
When you know the total number of sales made and the total number of leads required to make those sales, you can determine your ad spend to make one sale. If it took twenty-five leads to generate five sales, and each lead cost $4, some simple math tells us that it took $20 of advertising to make one sale.
Hopefully, your profit on each sale is more than the cost of making that sale. If it is, you can continue to pour funds into your ad campaign, knowing that you'll make it all back and more. If your profit per sale is less than the cost of making the sale, it's time to go back and examine your ad and your website. Can you decrease your cost per click with better ad copy or more engaging images? Does your website encourage visitors to opt-in, or is there a disconnect between your ad and your website?
Do you still need to worry about profitability on the front-end? It's a great question. The answer is "no". Front-end profitability is not as important if you have a follow-up system that continues to engage your customers and make additional sales. The metric you should then be looking at is the lifetime value (LTV) of your customers. Can you calculate the profit from the LTV of your average customer? If you're able to, and you spend less to acquire a new customer than the LTV profit amount, then your advertising will remain profitable.
In this example, let's imagine your business makes and sells widgets. It costs $10 to make one widget, and the widget sells for $30. The profit on each widget sold is $20. Knowing this, you can spend $20 to acquire a new customer. Your Facebook ad campaign produces one new customer for every ten new leads. Ten leads generate $20 in profit, so each lead can cost you $2 and you'll still break-even. For every five clicks on your Facebook ad, you get one lead. The cost per click must be $0.40 or less for your advertising to break-even.
It's possible to figure out if your Facebook ad is a winner or a dud in three days if you follow these steps. You've got to spend a minimum amount on your ads to get meaningful data. From that data, you can calculate the most important metrics, including your click-through rate and your cost per click. Calculating your cost per conversion and the cost per customer acquisition will finally show whether you should pause that ad or keep it going.
Thankfully, it can be a quick process to determine how effective a new Facebook ad campaign will be. Many new homeowners in my city aren't able to enjoy their yards as quickly. They don't reap the benefit of a beautiful lawn as soon as they sow the grass seeds. By the time it takes those seeds to have grown into an enjoyable lawn, you may be gone through several new Facebook ad campaigns. Or if you're really good, only one campaign that is making you a profit.
Thank you for taking the time to read this article. I hope you found it not only enjoyable but also helpful. If you did, please share this article on your social media. For what to read next, I'd recommend my article titled "Why Website SEO Has Gone The Way Of Flagpole Sitting." In it I discuss how investing in SEO for your website doesn't produce the results it did years ago.
Previously published at https://stevekehler.com/how-to-know-if-your-new-facebook-ad-campaign-is-a-dud-in-3-days-or-less/
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