I communicate to The Modern Marketer family on a daily basis:
“Get used to spending money on Facebook, daily. Period.” -Derek Palizay
It’s just the reality if you want to scale a business profitably—let alone have a chance at running profitable Facebook campaigns.
If you’re a small business owner, startup owner, marketer or any type of entrepreneur in 2017 who is NOT spending money on Facebook every day, you’re losing. And you are losing quickly.
Right now we have clients using Facebook to:
- Generate $125+ for every $15 spent on Facebook
- Adding tens of thousands of people to their email list every single month
- Landing $2,000 retainers for less than $100
- Adding more than 1,000 active followers to their Facebook page per week on less than $20 (by active we mean that many show up for his daily live sessions and comment and like and engage with his content.)
…and so many more examples.
The disclaimer is not every campaign is profitable and successful from day one. I will say, however, that as long as you can hone in on your acquisition costs and create evergreen ads that continually feed your funnel, you will win.
If you’re one of the tens of thousands of people who tell us “we’ve tried Facebook before and didn’t get results” or “we haven’t really explored the possibilities” or even “we run Facebook ads and they do ‘okay’ but we feel like we are missing something” then this article will solidify how to run profitable campaigns in a 2017 environment.
Let’s get it.
1. Figure out Your Customer Acquisition Cost
I’ve always told our clients and our audiences they need to make sure that their CLV (customer lifetime value) is 3-5x greater than their CAC (customer acquisition cost.) In Layman’s terms that simply means this:
“How much your customers pay you during your entire relationship needs to be 3-5x the money it took to get them to purchase in the first place.”
It sounds complicated until you hear it said like that.
In order to figure out what your acquisition cost is in an ONLINE environment, you need to understand the following equation.
- Your cost per site visitor
- Divided by the percentage of conversions into leads
- Divided by the percentage of conversions into customers
Here’s your visual.
If you’ve read our content before, you know we like to use real examples to show you exactly how simple these “high and lofty” marketing concepts can be.
So, check this out.
The following screenshot comes from one of our clients who owns a publication about relationships (singles, engaged couples and married couples.)
If you look in the bottom right hand corner, you can see we are averaging $0.09 per click to our website.
Side-note: Just to clarify, Facebook is still technically a PPC platform (pay per click) just like Google Adwords. Now, Facebook tends to focus in on different ad types and metrics instead of throwing your CPC in your face—however, it’s still readily available and you should constantly monitor or know where your CPC is for any given campaign.
Moving on, as you can see from this next screenshot, we are literally generating leads at $0.16 after spending about $2.6k…or so you would think:
Because the landing page we are running traffic to is an interactive quiz with video responses which LITERALLY has a 68% conversion rate. (The funnel is set up through Click Funnels.)
We’ve sent 24,616 people to this landing page and 16,739 of them turned into leads. (And by leads, we aren’t talking random, unqualified leads. These leads filled out over 10 questions in a survey and watched video responses based on their answers. So, qualified.)
Since we spent $2,641.63 to get 16,739 leads, we can divide the first number by the second number to get our $0.16 per lead (which is technically 15.7 cents but who’s calculating down to the tenth of a penny?)
But you can’t just assume that Facebook is right. There is always a little margin for error in any given platform’s reporting.
What we are after here though is the 2nd part of our equation, which is our cost per site visitor ($0.09) divided by our percentage of conversions into leads (that would be the 68% figure.)
So let’s run that part of the equation to get our REAL cost per generated lead.
$0.09 / .68% = $0.13 Per Generated Lead (see how this is different than what FB reports as a $0.16 cost per generated lead? That’s why it’s important to know your numbers. Close but not exact.)
This client was converting these generated leads at 1.13% into sales. So, let’s use that figure to run the next part of our equation.
$0.13 / .0113 (Converted Buyers) = $11.81 Customer Acquisition Cost
The membership that we are selling here is $25/mo and so far most of the members have been in the membership since it launched several months ago. Wouldn’t you agree that spending $11.81 for every member paying $25/mo is worth it. Especially considering that those members lifetime value is projected at 6 months per member, or approximately $150/member.
Anyone would pay $11.81 to make $150. It’s a no brainer. Wouldn’t you?
When you’re calculating your acquisition costs, however, you cannot stop at that number. $11.81 doesn’t account for the hidden costs. Hidden costs like:
- time spent (human involvement)
- software used for the campaign
- affiliate commissions and beyond
When you are calculating your businesses acquisitions on ANY channel, you have to at least consider these variable costs. And once you know that number, you simple divide the total cost of your variable expenses by the number of customers generated in that same period of time.
So, in this case, let’s run the variable costs part of the equation over a 30 day period, or a month.
Click funnels is $297/mo, hosting for the site is $9/mo, 5hrs a week from an employee is set at $12/hr ($240/mo) and Infusionsoft is approximately $599/mo—totaling the costs at $1,145 per month. Divide that by 185 customers for the month window.
= a variable cost of $6.18
When you add that variable cost to our original acquisition cost, our new acquisition cost becomes $17.99 spent for every $150 earned in CLV (customer lifetime value.)
The great part is that we recover the costs on the first transaction, which isn’t always possible.
That wasn’t too hard was it? After you do it a few times, you start to get really fast at understanding what it takes to acquire customers.
2. Focus on the right kind of traffic
Example of the wrong type of traffic
I was on a sales call with a client recently and I asked a question that I typically ask at some point in the conversation of ads:
“What is your objective for this campaign? What would you consider to be a successful campaign?”
To which they responded, “honestly, the goal is to drive a ton of traffic to the page and hope it converts, right?”
This type of response is very typical.
And whether it’s a client telling us or it’s you saying it in your head, we have to collectively come to an agreement that “driving traffic” is rarely our true objective.
Driving traffic isn’t anything but a building block for a bigger vision in an ad campaign.
You should be more focused on:
- What actions do you truly want a user to take?
- Who do you really want to connect with?
- What type of nurturing touch points are you going to have with this “traffic” or are you just relying on law of averages to play out and convert 1-3% of them into sales?
Typically, it’s 100% up to me what we do with a campaign.
In this case, however, I pleaded with the client for us to first run a micro campaign where we send traffic to a page that is tracked with a Facebook pixel, so we could:
- Retarget people
- Create a lookalike audience from the generated leads
This is an approach I like to take when a client doesn’t readily have an email list or database that we can use for targeting and creating audiences.
The client, having more experience in their industry than I, prompted me to simply run ads to their buyer persona with as large of a reach as possible. They wanted the reach to be millions.
…because in their head “the most traffic and the lowest cost per lead” were the main objectives.
Reluctantly, I followed along and sure enough, clicks were cheap, leads were cheap, conversion rates from traffic into leads were decent, but guess what? Out of hundreds of people who were generated as a lead, literally less than 5 of them took further action.
We generated maybe 5-6 sales qualified leads, let alone sales.
So, we reconvened and approached the campaign from a new strategy (which I originally would have liked to start with.)
Don’t learn your lesson the hard way.
Example of the right type of traffic:
What you’re campaign should look like instead of the above example is this:
Within 7 days of running a campaign for a clients’ conference where we were retargeting nurtured email subscribers, we generated $125-300 ticket sales for every $15 we spent. We actively created audiences, nurtured them and then guided them down the buyer journey before retargeting them with a decision ad.
Do you see the difference? The wrong way is just casting the largest net that you possibly can. The right way is to understand the buyer journey and your sales funnel, which if you don’t remember how those line up look at this:
3. Don’t wait for your audiences, create them
Since the birth of The Modern Marketer, there has been a quote that I’ve continually communicated with our audiences:
I get it.
Maybe you don’t have a large email list, maybe you don’t understand your buyer persona, maybe you don’t have a ton of people who’ve downloaded your app or visited your website.
You can’t, however, operate a business in a 2017-2020 environment and not ACTIVELY create audiences for your business.
Here’s an example of an audience that we are currently working on with The Modern Marketer:
Instead of relying on our buyer persona 100%, we wanted to create new audiences based on user behavior. So, this is how we came up with this Facebook lookalike audience of 1.7 million people.
We didn’t want the audience to derive from all paid traffic or all organic traffic, so we used both to create a source (email list) in which we could create this lookalike audience.
Here’s what we did:
We took less than a week to drive people to The Modern Marketer website via social media (mainly Instagram) and we simultaneously ran a carousel ad on Facebook to our latest and greatest articles. We knew some attributes of our buyer persona and plugged it into Facebook.
After a few days we drove about 1,600 people to our website between the two traffic sources.
I had set up a simple 2 tiered optin on the website with thrive leads.
One looked like this:
…and one looked like this:
From there, about 15% of the traffic (from both organic and paid sources) turned into leads from the website.
But the important part is that I started with targeted audiences (organic/nurtured users who already love us on social media, and a buyer persona target on Facebook.) From that targeted audience 15% of them BEHAVED their way into our funnel.
I took that 15% and went back to Facebook to create a lookalike audience that I am currently using to run a series of ads for a new campaign as you saw in the beginning of this section.
The conclusion is that I actively created a highly targeted audience simply by being proactive instead of waiting around for audiences to come to me.
4. Make your money back on the confirmation
One of the number one things that you can do to make sure that you are running profitable Facebook advertising in 2017 is to make your money back on ad spend before you get a user to your core product.
A few examples of what I mean is:
- the confirmation page before you deliver the assets
- the engagement series before the webinar
- the retargeting before the core product
- the pre-sale before the launch, etc
If you can break even on ad spend before you’ve started selling your core product, you’re almost guaranteed to win. Why? Because every sale from that point forward is in the green column (a.k.a. profit).
Several of my clients do this very well:
I have a fitness client who runs ads to an ebook and video series to collect leads. After the lead enters their information, a page pops up (before the ebook and free videos) that offers them a limited time discount on an hour session at their gym.
I have a publication client who runs ads to their webinars that they have 2-3 times per week. They make their ad spend back on the confirmation page with a one-click up-sell to their best selling amazon book. And the page is very simple as well, yet it recovers costs before anyone shows up to the webinar:
I have a real estate client who has an entire set of videos for free to access when you enter your information. When the user consumes the value, they are followed up with a 5-8 part email series upsetting a paid system at a tripwire cost. For him, that’s under $100.
We have example after example of how this works.
But whatever way you set it up, you need to find a way to recoup most of or all of your costs spent on ads before you even get to the part where you are selling that core offer or product.
There is A LOT covered in this article to help you run profitable Facebook campaigns in 2017. The approach, however, is simple—the only variable is your execution.
So, bookmark this article and revisit when you’re prepping a new ad campaign. Here’s a recap.
- Figure out your customer acquisition cost
- Focus on the right traffic
- Create your audiences, don’t wait for them
- Recover your ad spend before the core product is offered.
Let us know if this article was helpful for you! If you have any further questions, comment below.