This is a transcript from episode 12 of the OMGrowth Podcast, published February 3, 2021
“How much can I afford to spend on ads?” is a terrible question but I’m gonna answer it for you because I love you and because I was that kid you copied answers off of in high school and some things never change.
But look, there’s a WAY better question you can – and want to! – answer for yourself about Facebooks ads, and it’s this: “how much can I afford to make?”
START AT THE BEGINNING
You could meet the perfect person – YOUR perfect person! – but if you start off on the wrong foot, it’s going to be really hard for you to see that this is your perfect person.
It’s basically the same with ads. Not just Facebook ads but any form of paid advertising! Because you can create THE perfect ad – great copy, awesome image, sweet-spot audience targeting – but if that’s your starting point, you’re starting on the wrong foot.
Your advertising strategy starts with your offer and your strategy builds on how your offer is already converting.
Is your offer NOT converting? OK, well, that’s what your ads will likely build on, and you can continue this trend of NOT converting sales to your offer. It’s just that now, you have the great honor of forking over a whole lot of your own money to ole Zuckerberg and pals as you continue to not make any money on your offer – buzzkill!
UNDERSTANDING YOUR CLIENT JOURNEY
If you aren’t converting website visitors to your offer, THAT’s the problem you have to fix first. If the warm, motivated leads who are already digging around your site aren’t picking up what you’re throwing down, it isn’t by bringing in cold leads who have never heard of you that you’re going to fix this issue.
And it is an issue… it’s just that now you have to identify WHAT that issue is!
- Are you getting enough of your website visitors to click-through to your sales pages?
Try improving your calls-to-action (or what the cool kids call your CTAs) to get more of those eyeball on your offers.
- Is your sales page where the bottleneck is? This is the usual suspect for why an offer doesn’t convert and there are a lot of reasons why. Maybe your copy needs some work, maybe your purchase buttons aren’t clear enough, maybe your page has design flaws, maybe your offer itself isn’t clear enough.
Get an honest, fresh set of eyes to provide you with some feedback on your sales page. Another great plan is track HOW people are interacting with your sales page so you can get insights on things like how much of the page are people scrolling through, where are they spending the most time reading, and what are they clicking on. You can use tools like HotJar, CrazyEgg or AppSumo to gain these types of insights.
- Is there an issue with your cart processing? If there are problems with your checkout process and you’re literally not allowing people to pay you, this is the simplest fix.
Go through your own checkout process on desktop, mobile AND tablet. Make sure to eliminate any unnecessary hurdles there are for all device users to buy from you.
You have to understand your client journey. Not in the step-by-step way of writing down which links and URLs lead to what – although that’s also good – but you have to really look at this as a purchasing experience.
What kind of experience are you offering? What client journey are you providing? Would you buy from you? Can ANYONE buy from you?
Because once you have that covered, you can then hone in on what that experience translates to… like, in numbers and dollars!
KNOW YOUR NUMBERS
Which brings us full circle to the first question I suggested you find the answer to: “How much can I afford to MAKE with Facebook ads?”
—> If you can answer that question, you’re ready to invest in ads because you have an idea as to how much you can afford to spend on ads and still turn a profit.
—> If you can’t answer that question, let’s change that for you today, because there are a number of factors to consider.
1) The first thing you need to know is the conversion rate of your sales page visits to sales. How many people have to visit your sales page before you make a sale? If you make a sale for every 10 people who visit your sales page, this means you have a 10% conversion rate. Congratulations, boss!
2) Next – and this one should be easy for you – but you need to know how much revenue is brought in by each sale. Say you make $100 from each sale. If you make a sale for each 10th person that visits your sales page, that makes each visitor to your sales page worth $10 in revenue.
Great! So that means you can afford to spend $10/lead to break even, right? Ummm, no.
3) Revenue and profit aren’t the same. You have overhead that needs to be factored into your bottom line. Heaven knows you don’t need me to remind you that you have taxes to pay on your revenue – yes, even ad revenue you barely break even on or worse, that you lose money on. And if you’re paying for someone to manage your ads, that’s a whole additional expense to factor in.
4) Also, you can – and should! – anticipate that the conversion rate for warm, organic leads will be different from the conversion rate you get from your cold, paid leads. Knowing your existing conversion rate is a baseline and different traffic sources will tell different stories about that baseline, all of which are important for you to know as a marketer.
So what if that leaves you saying, “Sweet, Lanie – turn outs that I CAN’T afford to make money from Facebook ads. Thanks for crushing all my hopes and dreams, jerk face.”
Well, I’d begin by saying that the name-calling is unnecessary, but I’d also tell you that not all is lost and you have options.
INCREASING YOUR PROFIT MARGINS
There are things you can do to increase your profit margins, such as:
- IMPROVING YOUR CONVERSION RATES: The better your website and sales pages convert, the more money you stand to make from each visitor – whether they came to your through search, referral or, yes, even paid ads! This may not be easy to pull off – but it certainly is the simplest way to increase your bottom line – and the improvement will stack onto and directly impact any other improvement you make in the process.
- RE-THINKING YOUR AD STRATEGY: Explore the potential ads have for you other than just driving traffic directly to your sales page. Consider retargeting ads that are only show to the specific people who have already visit your sales page – and therefore have indicated some interest in your offer – but haven’t yet purchased. Try advertising a free or low-cost offers that then promotes your main offers in a way that nurtures and demonstrates value to your new client. The point is that there are many creative ways in which ads can be part of your marketing strategy… but you have to think through and track how you are profiting from them and not just “making money”.
- RE-THINKING YOUR MARKETING SPEND: Perhaps your marketing dollars aren’t best spent on ads! There may be more cost-efficient ways for you to generate more traffic. Remember that the goal is to get eyes on your sales page and you can do that through speaking engagements, joint ventures, search traffic, among many other strategies.
Which brings us to our favorite part of each episode: how the hey are you going to tap into your own OMGrowth Moment when it comes to making money with Facebook ads?
Here are this week’s ACTION ITEMS for you to do or outsource to your virtual assistant.
1) UNDERSTAND YOUR CONVERSION TRENDS.
Does your offer convert? Figure out what the sales conversion rate is for your offer’s sales page. Gain some clarity as to what the value is – in dollars! – for each person who visits your sales page as a baseline number you need to know before you can even consider what you can afford to spend on a new lead.
2) Seek out opportunities for improvement.
Whether that means hiring someone to review your sales page, or going through your own purchasing process, or increasing how much of your overall website traffic gets to see your sales page – there is no lack of actions you can take to improve your offer and sales experience. While the wash-rinse-repeat process of doing that isn’t exactly glamorous, that’s how improvements work – in an incremental fashion – and it’s where increases in – not just your revenue – but your actual take-home profit comes from.
And 3) TREAT ADS AS AN “ADDITION TO”.
Remind yourself that ads work as a complement to what’s already working, rather than a supplement to what isn’t. If you aren’t already making money on your offer through your existing traffic sources, you need to fix whatever is already leaking. Otherwise, you’re just going to waste money getting more traffic… that will leak through as fast as your existing traffic without ever improving your conversions.
There’s no sense in making $1 million dollars off of your offers if $900,000 of those dollars are going to Facebook ads; that profit margin won’t even cover your taxes and overhead, much less give you a decent salary for your efforts.
This applies to every investment you make in business: “how much can I afford to make” will always be a better question to ask than “how much can I afford to spend”!
And the more you understand how your offers work – and don’t work! – for your and your audience, the better you’ll be at answering that question.