Returning your Advert Spend

Return on advert spend or ROAS is the key metric to track your Facebook and Instagram campaigns. The cost per click or cost per impression means nothing if you are not making money.  Facebook and Instagram have incredible reporting tools to show you exactly how your ads are performing and how much money your ads are making you.

How much are you making?

Remember that your Facebook ads manager will report back on the total sales value. If you sell 2 products valued at $50 then ads manager will report that you made $100 if you spent $50 on that campaign then you think you have made $50 back BUT Facebook doesn’t know your costs are and doesn’t know how much profit you have made.

If your profit margin on a $50 product is only $20 and you have spent $25 to make that sale then you are actually losing money BUT Facebook will report to you that you have made money. That’s why it’s important for you to know exactly how much profit you make on your products and that will tell you how much you can spend on getting that sale before you are losing money.

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How much is a Customer worth to you?

Do you sell products that are only that are needed once or will your customers return to you time and time again? Understanding the Life Time Value of a customer in your store is key to knowing if you ads are returning for you.

Lets look at this example:

  • You sell protein powder – a standard bag lasts 1 month and costs $50
  • Your customers don’t just buy one bag – they buy 12 bags a year
  • The customer is actually worth $600 to your business because they don’t just buy once – they buy again and again.

So if you spent $70 to acquire that customer – you might feel like you’ve lost money on the first sale BUT over the customers lifetime you will actually make more money back.

To truly understand your costs per conversion you need to factor in the Life Time Value of a customer