In today’s world, is there anyone who isn’t on Facebook? This social media giant has become one of the best ways to market and capture new audiences, whether you have a new eCommerce business or an established eCommerce brand.
With now over 1 billion users worldwide, Facebook Advertising is no longer just about boosting a sponsored post or spending $5 a day on one or two ads; especially in the eCommerce industry.
Facebook Ads enable a business to focus their efforts on targeting the right kind of audiences to deliver website traffic, whip up brand awareness and excitement and, most importantly, generate leads and sales. To do all of this, and to do it well, takes skill and ongoing learning.
But once your Facebook Ads are up and running (whether you are self-managing or use the services of a Facebook Marketing Agency), what are the main eCommerce KPIs [key performance indicators] for Facebook Ad Campaigns that you need to monitor to ensure Facebook Ad success?
There are a few pivotal KPI’s that you can look at to see if your Facebook Ads are actually delivering results. You will also be able to see if you need to retarget your ads to get a better return on the investment you’ve put in.
After 10 years of helping over 200 US eCommerce brands and seeing countless businesses ‘ripped off’ by so called Facebook Advertisers who don’t know the first thing about marketing, I decided it was time to lift the lid on the secretive nature of Facebook Ads and educate eCommerce businesses around EXACTLY what they should be looking for in terms of performance metrics.
If, after learning the following KPIs, you are unsure about the success of your Facebook Ads, be sure to drop me a line for a confidential chat and free 30-minute analysis of your Facebook ad account.
Main KPI’s for Ecommerce Facebook Ad Campaigns
Each of the following KPI’s will help you to understand how well your Facebook ads are working and how much revenue they have really brought to your business. If you are not hitting these metrics, that doesn’t mean you should stop using Facebook as a digital marketing channel. It basically means that you need to look at the strategies, the content, and the segmentation you have on your Facebook ad account. You can always use an agency, such as ours, to help you since it might not always be evident what you could be doing differently.
ROAS Over a 7-day Rolling Period
One of the strongest data points that we use for our clients is the ROAS over a 7-day rolling period. This is done using the 7-day-click-through attribution and helps us see how well the Facebook ads are doing. ROAS, or Return on Ad Spend, is the total revenue that is generated from Facebook ads divided by the total ad spend.
Essentially it is the profit that you are making through this marketing channel. We look for three times the ROAS and if our clients are hitting that, it means we have done well.
A 7-day click-through attribution basically will help you understand when the conversion is happening and how much revenue compared to the cost you are making in the window. It also will help you understand when visitors come from Facebook compared to organic traffic.
Pretty much all the KPI’s that we will be talking about moving forward will ultimately have an effect on your ROAS. This indicator is not only important to track your progress, it is also a good way to make sure you are always profiting from your Facebook Ad strategy and not running in any losses.
With all the clients we have at Karizma Marketing, we focus on ROAS and every other metric helps us get the 3X we are looking for.
Cost per Unique Add-to-Cart
Another thing that we look at in conjunction with the 3X ROAS is the Cost per unique add-to-cart with the average cost per purchase.
The purpose of Facebook Ads is to help you get more visitors to your website and make them purchase something from your business. Whenever someone clicks on a Facebook ad you are running and goes to your website and adds to the cart it is counted as a unique add-to-cart metric.
This metric is especially important as it caters to any or all repeated events. Let’s say you have around 15 clicks on your Facebook Ad and from those, 10 people add to the cart. Now that means that you have an add-to-cart rate of around 66.67% and that is pretty good but have you thought about how many of these are repeated events?
You can’t make sure it wasn’t the same customer who added to cart multiple times and that is why it is important to look at the unique add to cart rate.
Once you know what your add-to-cart rate is, you can see what the average cost of purchase would have been.
The average cost of purchase is calculated by dividing the total amount of money you have spent during a significant period and the purchases linked to your Facebook ads during that same period.
One of the biggest red flags in Facebook Ads is if the cost per unique add to cart is exceeding 30% of the average cost per purchase. This means that you are essentially spending a lot more and not getting enough of a return on it. It could mean that you may need to work on your website or the ad content that you have.
If this metric is exceeding 30% of the average cost per purchase, you will ultimately struggle to the 3X mark.
Average Cost per Purchase and Average Order Value
We know what the average cost of purchase tells us, well now we will see what it means in terms of the Average Order Value. This is one of the custom metrics you can have on your Facebook Ad account calculated by dividing your revenue by the number of conversions you have had. It basically calculates the amount that each customer is spending on your website compared to the conversions you have on your ads.
If your average cost per purchase is exceeding 30% of the average order of value, we take that as a huge red flag. It basically means that you are not making any profit on your Facebook ads. Let’s say your average cost per purchase is around $50 while your average order value is $70, you’re not necessarily making enough profit and may need to rethink your ad strategy or content.
This metric will have an impact on your overall ROAS and may stop you from achieving the 3X ROAS.
The next performance indicator that you can look at to assess if your Facebook Ads are profitable is the CPC. CPC refers to the Cost per Click and essentially refers to the cost that you incur each time someone clicks on an ad that takes them to the website. CPC is calculated by diving ad to spend by the click-through rate you have on all the ads.
For most of the ads that you have your CPC should not exceed $2. The average CPC that you incur will ultimately depend on the industry that your business operates. But at any point, your average CPC should not be exceeding the $2 limit. There may be some ads that have a higher CPC but as long as the majority of them are under the $2 limit, you’re good.
Another thing to note here is the metric of CPM. CPM is the cost that you incur for a thousand impressions of any ad you have running on Facebook. Your ad spend divided by the impressions you get on the said ad, multiplied by 1000, is how you can calculate your CPM. If you get a very high CPM when you go to remarket audiences, it might be okay if your CPC crosses the $2 limit. This is because when you pay for an ad to show up a thousand times, you have no guarantee that 1000 unique users will see that ad.
You may end up wasting the money that you spend so it is then better to spend more on the CPC rather than the CPM.
CPM under $40 for CPC to be profitable
CPM and CPC are two different ways that you can choose to spend your ad budget on your Facebook Ad account. For all our clients here at Karizma marketing, we focus on making sure that the CPM stays under $40 for the CPC to be affordable. If you’re spending too much on your cost per thousand impressions, you will end up spending more on your cost per click as well.
For the cost per click to stay affordable, the cost per thousand impressions has a limit of $40. Let’s say your total spend is $50 and you get about 1250 impressions on your ads, this means that your CPM will be $40. Take into account the impressions you get and the assumption that your ad got about 100 clicks, your CTR comes to around 8%. With that, we can calculate the CPC which equals about 0.50$. As long as you stay under the $40 with your CPM, your CPC will stay affordable for you.
Image © Wordstream
CTR or click-through rate refers to the number of times a user has clicked on your ad and gone to your website. This rate is a good way to assess if your ad is doing its job and if the content of that ad is actually good enough. This is a good metric to judge if your segmentation is done right and if your offer is attractive enough to your target consumers.
If a CTR is very low for a certain ad campaign, it usually bodes well to go all the way back to look at your strategy. One of the first things you should be looking at is where you are choosing to place your ad. One of the best places to show your Facebook ad is within the timeline. It is where you will get the most impressions and ultimately conversions.
Apart from ad placement, you should also be looking at the content of your ad. Now, content here is not limited to the words that you choose for your ad but also the pictures and the way everything is eventually presented to the audience. Understand your target audience and figure out what words and phrases work best with them. Choose pictures that are bold and eye-catching to stand out on a timeline and drive the CTR up.
The last thing you should look at if you have a low CTR is the target audience perimeters that you have set. It’s always a good idea to break down your audiences into smaller micro audiences as this allows you to reach an audience that is more likely to click on your ad and respond to your offer. Make sure you are setting your target audience to consumers that will react to your business and your CTR should start improving.
Cost per Lead under $1
The amount of budget that you spend on a campaign divided by the number of leads you get tells you your CPL or cost per lead. The main aim of any Facebook ad campaign should be to keep the CPL under $1 otherwise it costs you a lot of money to gain not a lot of leads. CPL is one of the best key performance indicators to assess if your Facebook ads are doing their job well.
If your cost per lead is more than $1, you can do a few things that can help you spend less money and acquire more leads. You should make sure your target audience is narrow enough to target only those users that would genuinely be interested in your business. However, don’t go too narrow either as you may end up missing out on other market segments. You can also take the analytics that Facebook provides and use them to target people that are in the middle of the sales funnel.
Make good use of the space you have on Facebook and be smart about your ad placement. Use audience reactions and communication to draft your sales to copy so you can attract a lot more people based on your Facebook ads alone. One of the best things that you can do to convert users that have left at various stages of the buying process is to use retargeting ads.
CPL can be lowered using many different methods and once you have a cost per lead that is less than $1, you can be sure that your Facebook ad campaigns are working how you want them to and bringing in a lot more consumers for your business. Your CPL can be more than $1 if you are opting in for a paid offer. This is because you are guaranteed a lead this way and won’t be wasting any investment.
So, here are the best KPIs for Facebook Ad accounts that you should be looking at. We make sure that all of the clients we work with are hitting the correct metrics and their Facebook ad campaigns are performing as per these KPIs. I hope you learn something here and it helps you be better at Facebook Ads.