What is a good average CPC
The simplest formula for rating Facebook campaigns
Everyone who advertises on Facebook basically only wants one thing: that the campaign runs profitably. A simple formula can help you estimate the value of your ad.
Scoring Facebook campaigns can be very simple
Martin Smith, CEO of Overflow Marketing Solutions, presents his concept at Entrepeneur, with which he evaluates Facebook campaigns. He breaks the whole thing down to a calculation with just two sizes: CPA
CPA means the cost per acquisition, i.e. costs per new customer acquired. AP means Average Profit Per Client, i.e. average revenue per customer. The principle is simple and certainly not new. If the cost of a generated customer is lower than what you earn from them, the campaign is profitable.
You can calculate the average revenue per customer by adding up the sales with new customers and then subtracting the costs that went into them. You divide the result by the number of new customers. This is perhaps greatly simplified, but can be implemented for most business models. It is important not to set the time span too short when calculating sales. After all, customers can spend money with you multiple times. Smith therefore recommends including a customer relationship of at least six months in the calculation.
With a turnover of 100,000 euros and costs of 75,000 euros from a total of ten customers, we would therefore have an AP of 2,500 euros. Smith emphasizes that not everything should go into customer acquisition, but recommends a value between 7 and 15 percent for marketing and sales. At a realistic 10 percent, we come to 250 euros AP.
Now there are four components that influence the cost of your ad on Facebook:
- Click-Through Rate (CTR) ~ 1 percent on average
- Cost Per Click (CPC) <3 dollars, i.e. the equivalent of 2.60 euros
- Lead Conversion Rate (LCR) > = 20 percent
- Sales Conversion Rate (SCR) > = 5 percent
The average values vary depending on the industry. Smith used official benchmarks as a guide.
Let's assume that 20,000 people receive an advertisement for your website. That results in 200 clicks. With a CPC of 2.00 euros (for the sake of simplicity) that makes 400 euros that you paid. 20 percent of the 200 clicks means 40 leads, two of which become customers. So you spent a total of 200 euros per customer. According to the formula CPA Smith gives a few tips along the way if the formula doesn't work as expected: The formula may be oversimplified and occasionally present companies with challenges in their application, especially when it comes to assessing the costs a customer incurs. Nevertheless, it gives you an overview relatively quickly of which campaigns you should invest more budget in and which you should stop. If a Facebook ad is running profitably, there is actually little reason not to put even more budget into it.
Adjustments for unprofitable campaigns
Smith gives a few tips along the way if the formula doesn't work as expected:
The formula may be oversimplified and occasionally present companies with challenges in their application, especially when it comes to assessing the costs a customer incurs. Nevertheless, it gives you an overview relatively quickly of which campaigns you should invest more budget in and which you should stop. If a Facebook ad is running profitably, there is actually little reason not to put even more budget into it.
Anton Priebe was active at OnlineMarketing.de from 2013 to 2019. As editor-in-chief, the studied German studies and sociologist focused on technology, creative marketing strategies, conversion optimization and SEO.
- How long do leather jackets last
- What makes a nation strong
- What is the dark side of Blackpink
- What is the largest army in the world
- What are some Russian vodkas made of?
- Needs the military dentists
- What is an IQ of 117
- What kind of food is Swedish
- Offers Google jobs for doctors
- Chocolate makes gout worse
- Can I get a girl for sex?
- Is there a black privilege
- How is NUST for computer science
- How do I clean 925 silver chains
- What are the cons of QuickBooks
- How does the bra cup size work
- Who is Mehbooba Mufti's husband
- What is electronegativity
- How is Adelaide better than other cities
- How do deaf people understand the language
- What is your assessment of Falun Gong
- How does culture influence economic development?
- What are your favorite airports abroad
- Do Ghanaians take part in ancestral DNA tests?