Updated: Nov 17, 2021
If you have a Facebook ad campaign which is bringing in some sales, but not meeting your profit goals when you look at your cost per conversion versus your overall revenue, there is one change which can make a big difference. This article will look at how you can make changes outside of tweaking the Facebook ad setup to increase your profit margin and make your Facebook ad campaigns as effective as possible in 2021.
What can you do to optimise your facebook ads?
Often, when a business has an ad campaign which is working in theory but they want to optimise their results, they will begin by testing the different variables in ad setup and targeting, from trying new ad creative to changing audience size. Testing the different elements of your campaign in isolation is a great way to make your campaign as strong as possible over time. However, one of the quickest ways to increase the profits you see from your Facebook ad campaigns is to make a change outside of Facebook’s algorithm: increasing your customer value.
What is customer value on facebook?
Increasing your customer value means building a customer base of people who will spend more on your product or service, whether that’s by returning often or making bigger purchases. Many of the most profitable Facebook ad campaigns come from companies who provide high end services such as home refurbishments. This is because a company whose product costs thousands of pounds per purchase can spend £500 or more per customer in terms of their cost per conversion, and still see significant profit margins. When you are increasing customer value and working with bigger purchases per customer, your cost per conversion does not increase proportionately to your profits. It is very rare that a single change to your Facebook ad campaign would increase its profitability by 200 or even 300%, but it is actually possible if you shift your focus to high value customers.
How much does it cost to increase customer value?
Increasing customer value is a cost effective approach to improving profits for your Facebook campaign, because even as you increase the amount you spend on reaching customers, you are ensuring that the customers you convert spend more on your product in turn. For example, if you were selling a £20 product through your campaign, and each conversion from seeing the advert to purchasing your product costs you £10, then once you factor in production and distribution costs, your profit margin is not going to be significant.
However, if you sell a bundle of several related products, an ongoing subscription, or a multi-pack of your products, depending on which is most appropriate to your business model, you can increase your revenue without increasing your ad spend proportionately. If instead of selling one £20 product, you sell an £80 bundle of four, your cost per conversion will not also multiply by four, meaning your profit margin has increased and your ad will perform better for your business. So, it is worth spending more on advertising to generate higher value sales.
How can you increase your customer value?
Even if your business is not selling a typically high spend product, there are several ways you can increase customer value. One technique is to remarket the same people so that they buy repeatedly from your business, becoming loyal and ultimately higher value customers. You can also increase customer value over time by upselling Facebook users to get them to spend more gradually.
However, the most effective way to increase customer value for your facebook ad campaign is to sell your product alongside highly related items which will be useful to your customers, such as selling sports socks with shin pads, or kitchen sets rather than individual pans. Even if this is not an option for your business, then selling a few weeks’ worth of a product, or a multipack can have a similar effect. It’s worth considering expanding your business model in small ways to create bundles if you can,as not only is it a highly profitable way to sell through Facebook, but advertising in bundles keeps your business competitive with rival brands, as customers cannot compare your products or services directly and so are less likely to shop around.
To learn more about Paid Ads and how effective it can be for you, click on the link https://www.regalroye.com/paid-ads and you will be directed to our main page for more details.
If you would like to know more about how to keep your Facebook Ads profitable contact Regal Roye today and we'll get you started.