I. Advertising Is an Investment
Remember the story of Jack and the Beanstalk? In the fairy tale, a boy trades his family’s source of food and income — a cow — for magic bean seeds. Angered by her son’s foolishness, his mother tosses the seeds out the window. For a moment, joke’s on mom. Overnight those tiny seeds sprout into a giant beanstalk that stretches high into the clouds.
Most people expect beanstalk growth from their Facebook ad campaigns. They forget there’s an evil giant lurking in those clouds. Instead, they bank on big magic. Speed. Results. They create a campaign, spend $100, and anticipate $10,000 returns.
Too often, people treat the dollars they put toward Facebook ads as magic bean seeds. It makes sense. That initial investment can be a big deal — as big a deal as giving up the family cow. Such a sacrifice should warrant something equally big in return — right? Tremendous sales = a huge return on ad spend.
It’s important to distinguish fairy tales from reality, and the reality is that most initial forays into Facebook advertising aren’t lucrative. Maybe the campaign results in no sales — or, just as bad, low sales. It’s easy to get frustrated. Who wouldn’t be upset that their time and money is yielding … nothing?
Modest gains or even losses — that’s the first thing to expect from Facebook ad campaigns. Too often, this is where people give up when really they should be practicing patience. As billionaire Warren Buffet says, “No matter how great the talents or efforts, some things just take time.”
Managing expectations is crucial. E-commerce giants like Dollar Shave Clubbegan as bootstrapped, shoestring endeavors, fueled by determination and the desire to fulfill a demonstrated need. The benefits of running a Facebook ad campaign grow over time. Those benefits mimic a customer acquisition curve that is bound to be familiar.
How to get from point A to point D? Forget the beanstalk and leave fairy tales to the kids. Budget time and money for a Facebook advertising program. This is the best way to insure the largest target audience is converted — at the lowest possible cost.
II. How Do You Measure Success?
If it’s a given that your campaign won’t start off with a bang, how do you know you’re on the right track? How do you measure the value of your marketing?
Remember: your ad campaign is an investment in your brand’s reputation.Any gauge of success must acknowledge this process. It’s a process of spreading awareness, determining a target audience, cultivating a voice, and, of course, honing a product.
Still, as your campaign continues, you’ll want to be armed with a few key measures by which to quantify your progress:
Break-even cost: Total costs = total revenue. You’re not making money, but you’re not losing money either. (Say it costs you $10 to make a T-shirt. If you’re selling that shirt for $10, the total profit is $0.)
Cost of customer acquisition: How much it costs to sell an item to a customer (i.e., if I spend $100 and sell 10 T-shirts, my customer acquisition cost is $10 — $100/10).
Lifetime value (LTV) of customer: How much revenue to expect from a customer over the course of a specific period of time (e.g., one year). If someone averages two purchases from per year, and my product is $20, the LTV of my customer is $40.
Target cost per sale: What do you need to break even or, better, become profitable?
Logical stuff. If you can commit to monitoring these metrics, you’re ready to dive and figure out how to strategize a stronger ad campaign.
III. Finding Out What Works
Dollar Shave Club’s Michael Dubin spent $4,500 to make his company’s first advertisement back in 2012. The 90-second video went viral, garnering more 22 million views. That was a clear indication that something incredible was happening — a massive audience was responding to a new brand’s proposal.
In reality, though, Dubin had spent eight months beta testing Dollar Shave Club. What seems like an overnight success was the result of calculated waiting — and patience.
Finding out what works in Facebook advertising is not impossible. You just have to be perseverant and follow a few best practices.
1. Set aside a budget for audience discovery.
In other words, prospecting. Think of your ideal audience as the bull’s eye in a game of darts. If you threw just one dart, what would the odds be of hitting the center of the target? Much lower than if you threw one hundred darts.
Yes, in the world of Facebook advertising, those darts can seem expensive — if you’re not focused on the long-game. Taking prospecting into account when you create your advertising budget is a way to give you room for exploration. In other words, buying yourself that bigger pack of darts.
2. Spend on multiple audiences to see where sales are coming from.
If you’re ambidextrous but only throwing darts with your right hand, you’ll never know if your left hand wouldn’t make all the difference.
Serving your ads to distinct audiences will help you hone in on the group most likely to purchase. When you aim for the bullseye, hitting the board is obviously better than throwing a dart that completely misses the target. The same is true with your advertising. The more interactions you have with an audience, the more likely it is to contain your target buyers. And interactions don’t have to be sales. In fact, at first, it’s rare that they will be:
Even though this person didn’t earn money back on their ad spend, they discovered valuable information about the kinds of people likely to make purchases. Audiences C and D added products to their carts. Audiences A and B didn’t. This tells us that, with another incentive — say, free shipping — Audiences C and D could be converted.
3. Keep analyzing where sales are coming from until you find a consistent audience.
You’re only going to know which audience works when that audience is spending.
How good at darts would you be if you gave up after one game? How good would you be if threw every day? The more disciplined you are in testing your audiences, the easier it becomes to decipher the results. By spending money and gathering information, you figure out what drives a sale.
You make hitting that bullseye inevitable.
There it is. Be prepared to spend and have faith. Determining that target audience is a process that varies for everyone. The important thing is that you don’t give up.
You could be on the cusp of generating a sale at a decent cost — and seeing your brand explode.
Read on to get to Dollar Shave Club status.
IV. Achieving Profitability
Whether it takes $500 or $5000 dollars, three weeks or three months, you find your target audience. You know this happens when you witness your Facebook ads convert. When you see your campaign drive sales. This is huge. When you reach this point, pause and congratulate yourself.
Now get back to work.
Because it is work to continue marketing successfully. How do you go from running a good ad campaign to a great one? In other words, how do you achieve profitability?
By engaging and remarketing to your target audience, you lower customer acquisition costs and increase revenue.
Every time an audience encounters one of your ads, that audience grows more familiar with your brand and your products. Marketing is remarketing. CRM provider Salesforce suggests that generating a usable sales lead takes 6–8 points of contact.
When your first ad campaign is underway, plan on doing as much work as you can to transition your audiences from “cold” to “hot.” “Hot” leads are those audiences that have already demonstrated interest in your brand. Interest can take several forms:
- People who view products on your website (Cold)
- Subscribing to your mailing list and/or following you on social media (Warm)
- People who have purchased your product in the past (Hot)
The longer you advertise, the more people will express their interest in your brand. As these people go from “cold” to “hot,” they become less expensive to advertise to.
Growth and awareness may be even more important than profitability, according to Harvard Business Review. And lowered customer acquisition costs are a happy side effect of growth.
Here are three scenarios that show how your brand might save or gain money through strategic remarketing:
- Your brand shows an ad to a person that doesn’t visit the site:
Your brand knows not to target this person again. By not wasting money on a “cold” audience, the brand saves money.
- Your brand shows an ad to a person who clicks, visits the site, but doesn’t buy:
There’s a strong chance this person will buy through remarketing — meaning they’ll convert at a lower cost. The brand gains money.
- Your brand shows an ad to a person who clicks and buys:
This person should be remarketed to with ads, as well as added to the mailing list. The brand gains money.
Growth plus lowered customer acquisition cost? Now that’s how you hit Dollar Shave Club level.