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

Adjustments for unprofitable campaigns

Smith gives a few tips along the way if the formula doesn't work as expected:

  • CTR too low or CPC too high - Customize your ad to make it more effective. For example, it is a good idea to change the image or the text and test several variants. There are innumerable methods of conversion optimization.
  • LCR too low - Your landing page is either too complicated or does not deliver what the advertisement says. You can try either to lower the barriers on the site or to revise your offer or start retargeting with better offers.
  • SCR too low - This is subject to your sales department or the structure of your website, if you are responsible for it yourself, and has nothing to do with Facebook. Generally valid tips for this are difficult.

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.