Written by: Dianna Leyton
Are your company’s decision makers skeptical about Facebook advertising? Or, maybe you’re already running Facebook ads, but you’re unsure which metrics to report to your VP of marketing.
Whatever the reason you’re here, this blog will share tips and the most important metrics to help you prove Facebook advertising business value.
Focus on Metrics that Affect the Bottom Line
If you’re new to advertising it can be easy to get overwhelmed by all the different metrics that are available to you. Let’s take a look at what a typical dashboard on Power Editor looks like:
There are a lot of metrics on that dashboard, and this screenshot isn’t even showing everything.
Often times we can get so caught up in all of these numbers that we forget what ultimately matters: marketing should affect the bottom line. Does it really matter if your lead ad is getting lots of clicks at a low cost-per-click if you’re getting no form submissions? Or if contacts don’t make it through the sales process?
That’s where focusing on metrics that show business value comes in. Here are some metrics to focus on:
Conversion Rate and Goal Completions
Conversion rate is simply the rate at which a person takes a desired action. In the context of a Facebook lead ad, for instance, it’s the ratio of the number of people who have clicked your ad to those who have submitted a form. For example, if 80 people submitted your form out of the 1,000 that clicked your ad, your conversion rate would be 8%.
But first, let me offer a word of caution. Before you report something, it’s important to understand the bigger picture behind your metrics. Looking at conversion rate alone can sometimes be deceiving, especially if you haven’t run an ad campaign for very long. Advertisers often notice that conversion rate tends to be much higher at the start of the campaign and will begin to normalize as more time passes.
That’s why I recommend that you also report the number of goal completions (or in this case, form completions/leads) to give a clear picture of how successful the ad campaign is.
Let’s look at another Facebook lead ads example to explain this further:
Let’s say you launch an ad campaign and two days later you see that your conversion rate is at 5%. You look at a benchmark study and realize that it far surpasses your industry average. This is great news! Now you should quickly run to tell your head of marketing, right? Wrong.
Before you start boasting about your success, take a look at the number of actual goal completions. Upon further examination of the data, you see that one person has submitted a form out of 5 people who have clicked on your ad. Those numbers aren’t very exciting and aren’t statistically significant, which means that the results you’re seeing are mostly due to chance. Interested in seeing if your conversion rate is statistically significant? Check out this calculator.
Return on Investment (ROI)
If you want to impress the C-level, focus on ROI. Reporting ROI shows business value because it can easily prove whether your marketing is impacting your business. ROI can help you decide if Facebook advertising is bringing enough benefit, or if you need to reevaluate and invest time and money on something else.
The best formula for marketing ROI is:
(Gross Profit – Marketing Investment) / Marketing Investment
Let’s take a look at an example of how you would calculate ROI:
Let’s say you spend a total of $2,000 on Facebook ads in a month. This campaign resulted in 55 conversions or downloads for a whitepaper. Of those 55 people who downloaded your whitepaper, 5 of them ultimately became customers. Your average customer is worth $15,000 with a 15% profit margin.
The ROI for this would be ($11,250 – $2,000) / $2,000 = 462.50%
You would then be able to use this percentage as a means of comparison for other Facebook ads, or other marketing activities.
Cost Per Acquisition and Cost Per Lead
Need another metric to show business value? Start reporting on cost per acquisition.
Cost per acquisition (CPA) means the amount of money needed to acquire a closed deal or customer.
If we go back to our previous ROI example we see that it cost $2,000 to gain 5 customers. The cost per acquisition would be $400. Use this number to compare to other marketing channels and determine if it’s a cost effective means for generating new business.
Cost per lead (CPL) is the amount of money need to acquire a new lead. CPL is a valuable marketing metric, but is further away from the bottom line than CPA. However, if you know the rate at which your salespeople close leads it can be just as valuable as a CPA.
Let’s take a deeper look:
Let’s say that in our same whitepaper example we know that with $2,000 we generated 55 new leads from whitepaper downloads. At this point in time, none of them have become customers. We would determine that our CPL is $36.36. We can use this number as a means for comparison to costs for other lead generation channels.
But, let’s say that your salespeople have a close rate of 10%. Knowing this we can determine that 5 of the 55 leads will become a customer. We can then estimate that the Cost Per Acquisition (CPA) would be $400.
Use These Numbers to Budget and Make a Game Plan
Now that you know which metrics are most important to prove Facebook advertising business value, go forth and make some evaluations! Use these numbers to determine Facebook campaign goals and budget. If you’ve already invested in Facebook advertising, you can use these numbers to make business decisions. These metrics can help you determine if Facebook ads make sense for your business, or if you should try some other advertising tactic.
One more thing: if your metrics don’t meet expectations now it doesn’t necessarily mean that Facebook ads are not right for you. Sometimes things that don’t work immediately in the short-term take time to gain momentum and become hugely beneficial in the long-run.
There are a lot of things that could come into play here. Maybe you need to experiment with different creative — photos, video or words that make up your ads. Maybe you need to target a different group of people. Or, maybe you need to find a Facebook advertising expert that can help you bring more value to the business.
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