Feel shy to admit that you do not know how effective is advertising your company on Facebook? Surprisingly, studies show that only 8% of companies do analytics and can estimate the profitability of advertising investments in social networks. To determine whether your ads reach your target audience on Facebook, monitoring of right indicators and strategy adjustment is required. Before developing company’s advertising strategy, you should ask yourself following important questions:
What is the purpose of my Facebook ad?
Determine the final goal of your Facebook campaign. What actions should your audience accomplish? It could be anything from increasing sales to downloading an application or activity on your web-pages. Clearly follow your objective while developing Facebook advertising strategy. Understanding these approaches will help you to improve your content and select appropriate progress evaluation criterias.
How to measure success?
After precise goal definition, you can easily find the tools for calculating elements that make up your company's success. Among the variety of performance indicators, we suggest using the following metrics as a guide:
Increase Awareness If your goal is to attract users who are interested in your content, product or service you should evaluate the reaction to the advertisement in Facebook. Cost-Per-Mille (CPM) is an important indicator for an image advertising campaign. Cheaper shows leads to more coverage. For a commercial advertising, CPM is not a particularly essential metric. Much more important is the cost of conversion of the user in the sale.
CPM greatly affects the CTR. The less you perform non-targeted impressions, the cheaper clicks cost, as a result money saving. Therefore, the CPM of advertising campaign can be high, but if it leads to a large number of cheap and targeted clicks with further targeted actions, then you are doing everything right.
Click-through rate (CTR) - clickable ads, number of people who saw ads and followed the link. It helps to understand how attractive the ad is to users. Low CTR indicates that the heading does not match to the interests and desires of users, the offer is vaguely formulated or the image in the ad does not attract attention.
Cost per click (CPC) - the cost of a click, price for one redirection of user from ad to company’s website. CPC depends on the quality of the commercial, the number of competitors in the business sphere, the number and specifics of the audience. Narrow target audience and big number of competitors increases the cost of the transition.
Keep in mind that the choice of placement for ads strongly influences your CTR and CPC. Commercials shown in the news feed usually have higher CTRs and higher CPCs than in the right column. The main disadvantage of announcements in feeds is that it considered to be native ads and mixed with user content. Majority of people simply inadvertently click on advertising and do not take any actions.
Generating leads At this stage, the first financial metrics for evaluating the effectiveness of advertising appear.
Conversion rate (CR) - the percentage of conversion. It shows the percentage of visitors who performed the conversion action. A conversion action is any user action that confirms his interest in purchasing and leads to a sales funnel: viewing a specific page, responding to a chat, sending an e-mail or call, moving goods to the basket and the order itself.
Cost per action CPA - cost of conversion action. Indicates expenses on one user who committed the conversion action. CPA is calculated for each stage of the sales funnel and shows how much money we spent on bringing single user to a certain stage.
Cost per order (CPO) - the cost of the order. Conversion does not always mean an order while the order is the most important conversion action on the site. Therefore, there exists a separate metric. Order can be made by phone call and the last action on the site, which the client committed was sharing contact details for the call. Then, during the CPO calculation, the cost of the call center manager and communication costs are taken into account.
Generating sales This is where a potential client becomes real, and you get income. This stage is not directly related to advertising, but it is an essential part in achieving commercial results, as well as in work evaluation.
Liquidity Coverage Ratio (LCR) - the percentage of closed deals. The order is not the acquisition. The main goal of all marketing efforts is to bring a customer to pay. The percentage of closed transactions is the ratio of applications and purchases.
Cost-Per-Sale (CPS) - the cost of a closed transaction, calculated similar to the CPA and CPO indicators; instead of an indicator of committed target actions, we pay attention on the number of closed transactions.
Marketing management Metrics of this stage gives an idea of the conversion of marketing efforts into income. They allow you to evaluate completed work in the long term and the ability of your company to be associated with your client over a continuous period. In this case, you can use the proper remarketing option in Facebook as one of the efficiency increasing tools.
Customer acquisition cost (CAC) is the sum of all investments for attraction of one new client. Here, the total costs of marketing campaigns associated with the acquisition (without retention) divided by the total number of customers acquired. It is acceptable if the CAC is higher than the income from the initially attracted customer. Striving to reduce this index to minimum have a risk to miss clients who are interested in long time work with your company.
Customer acquisition and retention cost (CARC) is the cost of attracting and retaining a customer. All costs associated with attracting and retaining customers are displayed here. Its calculation considers not only the costs of attracting and retaining customers, but also the work of managers, salespeople, the maintenance of sale points, logistics, etc. CARC is determined as total marketing campaign costs related to acquisition with retention divided by sales.
Customer retention (CRR) is a ratio that indicates a business’s ability to maintain a relationship with a customer. If CRR is high, then customers come to you for new purchases. Otherwise, customers make only one acquisition and do not return. Work on customer retention starts with the first contact of business with a client.
CRR = (E – N) / S x 100% where E is the number of customers at the end of the billing period N - the number of customers received during this period S - the number of customers that are already at the beginning of the period
For example, at the beginning of the year we launched advertising on Facebook and bring 20 clients (this is S). For the whole year, we have attracted 45 clients (N). Until the end of the year, 10 clients stopped using our services, for a total of 55 active clients at the end of the period (E). CRR = (55 - 45) / 20 = 0.5 * 100% = 50%. In total, our retention rate is 50%.
When to change strategy?
If you feel that you miss some important data, it is time to upgrade goals of your campaign or try new indicators that will help you to improve your advertising performance.
Moreover, pay attention to Facebook Ads Manager. This is where the understanding of the effectiveness of your advertising begins. Any changes are presented in reports, relying on them you can set up primary analytics, as well as adjust the graphics and the tables according to the metrics that are most important to you.
Three points that will increase the effectiveness of your advertising campaign:
- Do not break the settings after running ads. Especially, when it comes to the budget, audience or placement. The maximum that can be done is to change the age of the audience. Otherwise, the effectiveness of the advertisement will be reduced. It is better to start a new campaign with the appropriate settings.
- Utilize Facebook Pixel on your website. This magic thing will allow you monitor visits to the site as well as remind clients about you company. Why do you need it? Facebook CTR is 21 times higher than with regular web remarketing, and CPC is 79% lower.
- If you are new in creating advertisements on Facebook and embarrassed with all measurements, metrics and placements then start by setting up a custom audience. To do this just upload your email database to Facebook. It will automatically match users with provided email and launch the commercial. Ideal for those who do not want to puzzle over!
